We enable retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online – no code required.
Currently our president, Mr. Elchanan Maoz, is also acting as our interim chief executive officer. The Company intends to engage a full-time chief executive officer once the Company has sufficient working capital to justify such expense.
Metro One Telecommunications, Inc. is focused on changing the way retailers integrate mobile commerce solutions within their business. Our multi-model, plug and play mobile commerce platform enables retailers to launch their own branded mobile application serving as an additional sales channel in a matter of a few hours – no code required.
Our recently incorporated Israeli tech company, Stratford, Ltd, merges the functionality of mobile technology, artificial intelligence (“AI”), and Machine learning enabling retailers to quickly and easily bring their business online to significantly:
We have recently completed the transformation of our acquired suite of software products to a fully modular SaaS based platform. This will enable us to scale the company significantly, onboarding multiple retailers simultaneously without any additional integration costs.
It allows retailers to effortlessly build a complete mobile commerce platform from scratch, adding additional features as their business grows and needs advance. A modular stack of technology also enables us to target retailers who has an existing mobile commerce solution as they can merely plug into one our specific features enriching their offering. bile commerce suite, where the retailer can and as their business needs develop.
Shelfy provides a mobile commerce platform that enables retailers to build their own branded mobile application in a matter of hours with intuitive drag and drop tools – no coding required. Adding mobile as an additional sales channel enables retailers to grow its customer loyalty and its revenues.
RISK FACTORS
Any investment in our securities involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this prospectus.
Risks Related to our Financial Condition
We have incurred significant losses to date and may continue to incur losses.
We have incurred net losses since we commenced operations. For the nine month period ended September 30, 2022, our net operating loss was $2,249,753. We have incurred net losses in each fiscal year since our inception. We had net losses of $3,341,980 and $53,236 for the years ended December 31, 2021 and 2020, respectively.
These losses have had, and likely will continue to have, an adverse effect on our working capital, assets, and equity. In order to achieve and sustain such revenue growth in the future, we must significantly expand our market presence and revenues from existing and new customers. We may continue to incur losses in the future and may never generate revenues sufficient to become profitable or to sustain profitability. Continuing losses may impair our ability to raise the additional capital required to continue and expand our operations.
Our auditors have expressed doubt about our ability to continue as a going concern.
The Report of our Independent Registered Public Accounting Firm with respect to our December 31, 2021 consolidated financial statements, includes an explanatory paragraph stating that the recurring losses, an accumulated deficit and a working capital deficit at December 31, 2021 raise substantial doubt about our ability to continue as a going concern for the previous standalone company.
We will need to raise additional capital.
We are currently completing additional development with respect to the intellectual property assets acquired from Royal App, Ltd. We will continue to incur research and development and other associated expenses up until our secondary product launch is complete. Any failure of the secondary product launch to generate revenues or sustain positive cash flows in sufficient amounts to fund our business operations may result in the need to secure additional financing beyond this offering in order to support our operations. We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all. Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative, selling and marketing and research and development activities are forward-looking statements and involve risks and uncertainties.
We may also need to raise additional capital to expand our business to meet our long-term business objectives. Additional financing, which is not in place at this time, may come from the sale of equity or convertible or other debt securities in a public or private offering, from an additional credit facility or strategic partnership coupled with an investment in us or a combination of both. We may be unable to raise sufficient additional financing on terms that are acceptable to us, if at all. Our failure to raise additional capital and in sufficient amounts may significantly impact our ability to expand our business. For further discussion of our liquidity requirements as they relate to our long-term plans, see the section entitled “Liquidity and Capital Resources — Capital Resources and Expenditure Requirements”.
Risks Related to our Business
The requirements of being a public company may strain our resources and distract management.
As a result of filing the registration statement, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These requirements are extensive. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
We may incur significant costs associated with our public company reporting requirements and costs associated with applicable corporate governance requirements. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
Ineffective internal controls could impact the Company’s business and operating results.
The Company’s internal control over financial reporting may not prevent or detect misstatements because of the inherent limitations of internal controls, including the possibility of human error, the circumvention or overriding of controls, poorly designed or ineffective controls, or fraud. Internal controls that are deemed to be effective can provide only reasonable assurance with respect to the preparation and fair presentation of the Company’s financial statements. If the Company fails to maintain the adequacy of its internal controls, including the failure to implement new or improve existing controls, or fails to properly execute or properly test these controls, the Company’s business and operating results could be negatively impacted and the Company could fail to meet its financial reporting obligations.
Changing economic conditions and other effects of the such changes caused by the coronavirus disease 2019 (Covid-19).
The Company’s operations may be affected by the recent and ongoing outbreak of Covid-19 which has been declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however it may result in a material adverse impact on the Company’s combined financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the ability of our management team to provide services to us, unavailability of supplies or third-party consulting services used in operations, and the decline in value of assets held by the Company, including, property held by the Company, as well as the availability of capital and the ability for retailers to purchase our products. The Covid-19 pandemic and mitigation measures have had and may continue to have, and any future epidemic disease outbreak may have, an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise capital when needed. The extent to which the Covid-19 pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
Growth of operations will depend on the acceptance of our products by our retail clients.
The acceptance by our customers of our newly modified mobile Shelfy applications, as well as additional mobile product offerings which are currently undergoing modification from original enterprise software module formats is critically important to our success. Shifts in user preferences away from the functionality of our mobile applications, our inability to effectively market our mobile application products so that they appeal to consumers, or changes in our products that eliminate product attributes popular with some consumers could harm our business. Our success depends significantly on meeting the specific needs of our retail clients on an ongoing basis, competitive pricing and ease of use by the end consumer. And inability to continuously meet these needs may have material adverse effects on our sales, results of operations, business and financial condition.
We cannot be certain that the products that we offer will become, or continue to be, appealing and as a result there may not be any demand for these products and our sales could decrease, which would result in a loss of revenue. Additionally, there is no guarantee that interest in our products will continue, which could adversely affect our business and revenues.
Demand for products which we sell depends on many factors, including:
| ● | the number of customers we are able to attract and retain over time; |
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| ● | the competitive environment in the mobile commerce industry, as well as the mobile application industry as a whole, may force us to reduce prices below our desired pricing level or increase promotional spending; and |
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| ● | the ability to anticipate changes in user preferences and to meet customers’ needs in a timely cost effective manner; |
All of these factors could result in immediate and longer term declines in the demand for the products we plan to offer, which could adversely affect our sales, cash flows and overall financial condition. An investor could lose his or her entire investment as a result.
We have limited management resources and are dependent on key executives.
We are currently relying on key individuals to continue our business and operations and, in particular, the professional expertise and services of Elchanan (Nani) Maoz, acting chief executive officer, president and director, Jonah Meer, secretary and director, and James Alexander Brodie, treasurer and director, as well as key members of our executive management team and others in key management positions. We plan to appoint a full-time chief executive officer, who will replace Nani Maoz, who is our acting chief executive officer, once the company has sufficient working capital to justify such a change. Mr. Maoz currently spends approximately fifty percent of his time with respect to efforts on behalf of the company. We plan to appoint additional independent directors in order to comply with NASDAQ requirements in the future, however, until any potential additional directors or officers are appointed, we may not have sufficient managerial resources to successfully manage the increased business activity envisioned by our business strategy. In addition, our future success depends in large part on the continued service of our current management team. We have not entered into employment agreements with our management team. If our officers and directors chose not to serve or if they are unable to perform their duties, and we are unable to retain a replacement qualified individual or individuals, this could have an adverse effect on our business operations, financial condition and operating results if we are unable to replace the current officers and directors with other qualified individuals.
Failure to achieve and maintain effective internal controls could have a material adverse effect on our business.
If we cannot provide reliable financial reports, our operating results could be harmed. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Based on our evaluation, our management concluded that there was a material weakness in our internal control over financial reporting for the year ended December 31, 2021. The material weakness identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of our financial statements for the year ended December 31, 2021. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We believe that the lack of internal accounting staff resulted in a lack of segregation of duties and the accounting technical expertise necessary for an effective system of internal control. Because of the material weakness described above, management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Failure to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. Failure to comply with Section 404 could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.
Competition that we face is varied and strong.
Our products and industry as a whole are subject to competition. There is no guarantee that we can develop or sustain a market position or expand our business. We anticipate that the intensity of competition in the future will increase.
We compete with a number of entities in providing products to our customers. Such competitor entities include: (1) a variety of large multinational corporations engaged in the mobile commerce industry, including but not limited to companies that have established loyal customer bases over several decades; (2) mobile commerce companies that have an established customer base, and have the same or a similar business plan as we do and may be looking to expand nationwide; and (3) a variety of other local and national mobile commerce and mobile application companies with which we either currently or may, in the future, compete.
Many of our current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and greater name and brand recognition than we have. As a result, these competitors may have greater credibility with both existing and potential customers. They also may be able to offer more products and more aggressively promote and sell their products. Our competitors may also be able to support more aggressive pricing than we will be able to, which could adversely affect sales, cause us to decrease our prices to remain competitive, or otherwise reduce the overall gross profit earned on our products.
Our industry requires the attraction and retention of talented employees.
Success in the mobile commerce and mobile application industry, specifically as it relates to our platform and products, does and will continue to require the acquisition and retention of highly talented and experienced individuals. Due to the growth in the market segment targeted, such individuals and the talent and experience they possess is in high demand. There is no guarantee that we will be able to attract and maintain access to such individuals. If we fail to attract, train, motivate and retain talented personnel, our business, financial condition, and operating results may be materially and adversely impacted, which could result in the loss of your entire investment.
We will depend on a large volume of merchants and retailers paying us a small monthly usage fee which may mean a high cost of customer acquisition during the first 2-3 years of our operation
Our SaaS software will target thousands of potential independent merchants and retail customers across multiple markets and in various locations. Each of these customers will pay us a small monthly usage fee for the use of our SaaS offering. As a result, in the first several years of our operation, customer acquisition costs and set up fees may be high in relation to subscription fees collected over the launch period. The Company expects a period of 2-3 years to reach suitable subscription levels to offset customer acquisition fees.
We currently are dependent on a small number of customers, and any loss of one of our current customers, or the failure to attract additional customers could adversely affect the Company’s ability to operate or generate revenue.
We currently are dependent on four customers for our operations, who supply us with limited revenue. Since we have a limited operating history, we cannot be certain that we will attract additional customers, or enough customers to successfully grow our business, generate additional revenue, or achieve our performance goals, which could result in the complete loss of your investment.
We currently depend on third party platforms for a portion of our business.
A portion of our sales revenue in the first four years will be dependent on third-party eCommerce platforms such as Shopify to host our software. As independent companies, providers of the third party platforms make their own business decisions. In the event that one of these platforms becomes redundant or completely changes some of their policies it may have a negative impact on our business and result in loses of business or existing customers. Their financial condition could also be adversely affected by conditions beyond our control, and our business could suffer as a result. Deteriorating economic conditions could negatively impact the financial viability of third party platform providers. Any of these factors could negatively affect our business and financial performance.
We may fail to comply with applicable government laws and regulations.
We are subject to a variety of federal, state and local laws and regulations in the U.S. These laws and regulations apply to many aspects of our business including the advertising and sale of our products. Violations of these laws or regulations in the manufacture, safety, labeling, transportation and advertising of our products could damage our reputation and/or result in regulatory actions with substantial penalties. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could result in increased compliance costs or capital expenditures.
Risks Related to our Intellectual Property
It is difficult and costly to protect our proprietary rights.
Our commercial success will depend in part on obtaining and maintaining trademark protection and trade secret protection of our products and brands, as well as successfully defending these trademarks against third-party challenges. We will only be able to protect our intellectual property related to our trademarks, patents and brands to the extent that we have rights under valid and enforceable trademarks, patents or trade secrets that cover our products and brands. Changes in either the trademark or patent laws or in interpretations of trademark or patent laws in the U.S. and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our issued trademarks or in third-party patents. The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
We may face intellectual property infringement claims that could be time-consuming and costly to defend, and could result in our loss of significant rights and the assessment of treble damages.
From time to time we may face intellectual property infringement, misappropriation, or invalidity/non-infringement claims from third parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome could affect us negatively. For example, were a third party to succeed on an infringement claim against us, we may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, we could face an injunction, barring us from conducting the allegedly infringing activity. The outcome of the litigation could require us to enter into a license agreement which may not be under acceptable, commercially reasonable, or practical terms or we may be precluded from obtaining a license at all. It is also possible that an adverse finding of infringement against us may require us to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible. In the case of diagnostic tests, we would also need to include non-infringing technologies which would require us to re-validate our tests. Any such re-validation, in addition to being costly and time consuming, may be unsuccessful.
Finally, we may initiate claims to assert or defend our own intellectual property against third parties. Any intellectual property litigation, irrespective of whether we are the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert our management’s attention from our business and negatively affect our operating results or financial condition.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Although we try to ensure that we, our employees, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we, our employees, or independent contractors have used or disclosed intellectual property in violation of others’ rights. These claims may cover a range of matters, such as challenges to our trademarks, as well as claims that our employees or independent contractors are using trade secrets or other proprietary information of any such employee’s former employer or independent contractors. As a result, we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
Risks Related to our Common Stock and this Offering
The market price of our common stock may be volatile and adversely affected by several factors.
The market price of our common stock could fluctuate significantly in response to various factors and events, including:
| ● | our ability to integrate operations, products and services; |
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| ● | our ability to execute our business plan; |
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| ● | operating results below expectations; |
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| ● | our issuance of additional securities, including debt or equity or a combination thereof, which will be necessary to fund our operating expenses; |
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| ● | announcements of new or similar products by our competitors; |
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| ● | economic and other external factors; and |
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| ● | period-to-period fluctuations in our financial results. |
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
There currently is a limited liquid trading market for our common stock and we cannot assure investors that a robust trading market will ever develop or be sustained for our common stock.
To date there has been a limited trading market for our common stock on the OTC Pink Marketplace. We cannot predict how liquid the market for our common stock may become. A lack of an active market may impair investors’ ability to sell their shares at the time they wish to sell them or at a price they consider reasonable. The lack of an active trading market may impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using our common stock as consideration. For companies whose securities are traded in the OTC Pink Marketplace, it is generally more difficult to obtain accurate quotations, to obtain coverage for significant news events (because major media channels generally do not publish press releases about such companies) and to obtain needed capital.
The trading in the Company shares will be regulated by Securities and Exchange Commission Rule 15g-9 which established the definition of a “penny stock.” The effective result is that fewer purchasers are qualified by their brokers to purchase its shares, and therefore a less liquid market for the investors to sell their shares. Therefore, you may have a difficult time selling your shares, or you may not be able to sell your shares at all, which could result in the loss of your investment.
The shares being offered are defined as a penny stock under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and rules of the SEC. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with spouse), or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser’s written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may make it difficult or impossible for you to resell any shares you may purchase.
Our directors and officers will continue to exercise significant control over our operations.
As of the date of this prospectus, our management and board of directors, currently hold approximately 33.02% of the voting power of our common stock and will hold approximately 25.4% of the voting power of our common stock following this offering, assuming all shares are sold, but excluding the exercise of warrants. Accordingly, our executive officers and directors will continue to have a significant influence in determining the outcome of all corporate transactions, including the election of directors, approval of significant corporate transactions, changes in control of the Company or other matters that could affect your ability to ever resell your Shares. Their interests may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other stockholders.
A significant portion of our total outstanding shares of common stock may be sold into the public market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the market perception that the holders of a large number of shares of common stock intend to sell shares of common stock, could reduce the market price of our common stock. After this offering, we will have up to 348,135,247 shares of common stock outstanding excluding shares underlying warrants and stock options.
We may issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of common stock.
Although we presently have no intention to do so without stockholder approval, which may be obtained solely through the votes of its management and board of directors, the Board may issue preferred stock with voting and conversion rights that could adversely affect the voting power of the holders of common stock. Any such provision may be deemed to have a potential anti-takeover effect, and the issuance of preferred stock in accordance with such provision may delay or prevent a change of control of the Company. The board of directors also may declare a dividend on any outstanding shares of preferred stock. All outstanding shares of preferred stock are fully paid and non-assessable.
Provisions of our charter documents could discourage an acquisition of our company that would benefit our stockholders and may have the effect of entrenching, and making it difficult to remove, management.
Provisions of our Articles of Incorporation and By-laws may make it more difficult for a third party to acquire control of us, even if a change in control would benefit our stockholders. In particular, shares of our preferred stock may be issued in the future without further stockholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as our board of directors may determine, including, for example, rights to convert into our common stock. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any of our preferred stock that may be issued in the future. The issuance of our preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire control of us. This could limit the price that certain investors might be willing to pay in the future for shares of our common stock and discourage these investors from acquiring a majority of our common stock. Further, the existence of these corporate governance provisions could have the effect of entrenching management and making it more difficult to change our management.
We have not, and may never pay dividends to shareholders.
We have not declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. If we do not pay dividends, our common stock may be less valuable because a return on an investor’s investment will only occur if our stock price appreciates.
If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.
The public offering price of our common stock will be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the extent additional shares of common stock are subsequently issued, you will incur further dilution. Based on an assumed public offering price of $0.12 per share and a fully subscribed offering, you will experience immediate dilution of $0.09619 per share, representing the difference between our as adjusted net tangible book value per share at September 30, 2022, after giving effect to this offering, and the assumed initial public offering price.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
We cannot specify with certainty all of our potential uses for the estimated net proceeds we will receive from this offering. Our management will have broad discretion in the application of the net proceeds. Accordingly, you will have to rely upon the judgment of our management with respect to the use of the proceeds, with only limited information concerning management’s specific intentions. Our management may spend a portion or all of the net proceeds from this offering in ways that our stockholders may not desire or that may not yield a favorable return. The failure by our management to apply these funds effectively could harm our business. Pending its use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our common stock could decline if one or more equity analyst downgrades our stock or if analysts downgrade our stock or issue other unfavorable commentary or cease publishing reports about us or our business.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes included elsewhere in this Information Statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this Information Statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those described below. You should read the “Risk Factors” section of this Information Statement for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Our Mission.
We enable retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online – no code required.
Our Objective
Metro One Telecommunications, Inc., is focused on changing the way retailers integrate mobile commerce solutions within their business. Our multi-model, plug and play mobile commerce platform enables retailers to launch their own branded mobile application serving as an additional sales channel in a matter of a few hours – no code required.
Through our recently incorporated Israeli tech company, Stratford Ltd., the Company will continue to merge the functionality of mobile technology, artificial intelligence “AI”, and Machine learning enabling retailers to quickly and easily bring their business online to significantly:
| · | Increase customer retention (60%) |
| · | Increase average basket size (30%) |
| · | Increase Up sell and Cross sell x4 |
| · | Increase customers lifetime value CLV – drastic increase in repeat monthly purchases |
We have recently completed the transformation of our acquired suite of software products to a fully modular SaaS based platform. This will enable us to scale the company significantly, onboarding multiple retailers simultaneously without any additional integration costs. Our first two mobile commerce app modules launched in August and September, 2022 on each of Shopify and WooCommerce and are currently available for consumers to download.
Highlights
The following are highlights of our operating results for the year ended December 31, 2021, and three and nine months ended September 30, 2022:
| ● | Revenue. During the three and nine-month periods ended September 30, 2022, we generated revenue of $18,525 and $56,668, respectively. During the year ended December 31, 2021, we generated revenue of $170,622. Our revenue for the respective periods is primarily attributed to license fees, subscriptions, and customized professional services related to our mobile commerce software platform. |
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| ● | Operating expenses. During the three and nine months ended September 30, 2022, our operating expenses were $1,075,922 and $2,421,282, respectively. During the fiscal year ended December 31, 2021, our operating expenses were $3,512,602. Our operating expenses include management fees, research and development costs, general and administrative expenses, sales and marketing costs and costs associated with our recent sales of securities. |
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| ● | Net income (loss). During the three and nine months ended September 30, 2022, and the fiscal year ended December 31, 2021, the Company reported a net loss of $1,057,397, $2,249,753 and $3,341,980, respectively, or a loss of approximately $0.00, $0.01 and $0.04 per share. |
We are currently onboarding customers for our recently launched. SaaS mobile commerce suite. The Shelfy mobile app, launched on August 1, 2022, is open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy. The Shelfy Mobile App Builder is also available effective September 1, 2022, to all WooCommerce developers, online stores, brands, and retailers at https://he.wordpress.org/plugins/shelfy-mobile-commerce-platform/.
Our recently launched mobile commerce apps represent over 14 months of post feasibility development including reprogramming and industry required modifications to transform our suite of Shelfy enterprise commerce software applications, acquired in fiscal year ending 2021, from IOS and Android to flutter applications, among other modifications for initial integration with WooCommerce and Shopify reseller platforms. We believe that the re-developed Shelfy software suite, now a single format mobile commerce offering available to all industry users, and fully customizable by the user, will generate increasing revenues period over period through recurring monthly subscriptions.
Historically, the Company was not generating revenue from its operations. Upon acquisition of the Shelfy intellectual property in 2021, we acquired two legacy customer accounts, using the existing Shelfy enterprise commerce software, both of which customer contracts terminate prior to close of fiscal 2022. To date we have only onboarded 3 new customers for our redeveloped “one-stop-shop” mobile commerce application. We expect our operational expenses to continue to exceed incoming revenues until such time as our recently launched mobile software suite obtains sufficient customer subscriptions to meet our ongoing expenses. We expect we will be required to support the sale of our downloadable mobile commerce app with substantial marketing expenditures. We expect to continue to onboard new customers on a monthly basis through 2023 as we focus on marketing our current software offering. While we continue to develop and expand our primary business operations during fiscal 2022 and 2023, our revenues are not expected to be sufficient to meet our ongoing expenses. The acquired mobile software assets generated revenue in the three and nine-month periods ended September 30, 2022, of $18,525 and $52,668, respectively, with revenues of $170,622I in the year ended December 31, 2021. We believe that by the close of fiscal 2023, our wholly owned operating subsidiary will generate revenue in a sufficient amount to meet our cash flow needs based on sales from our newly introduced SaaS mobile commerce suite.
Recent Developments
On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to acquire certain assets of Royal App, Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash as well as 8% equity in the Company on a diluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition, (the “Recapitalization”).
Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile enterprise software platform that helps retailers and fast-moving consumer goods companies become growth companies. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients. Concurrent with the acquisition of the Shelfy software assets, management determined the technological feasibility of proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering, initially integrated on key reseller platforms, with the intent of repositioning the software with an entirely new and much larger market base. An easy to use, fully customizable mobile commerce app for download by consumers across all industry segments for a base monthly subscription fee, and readily available add on features for additional monthly fees based on individual consumer selections.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFE”) from institutional investors and family offices. The terms of the SAFE require that they automatically convert into common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock. The Company’s intent was to undertake the conversion of preferred stock in the quarter ended September 30, 2021, following shareholder approval of certain proposed corporate restructure plans.
Subsequent to the conversion of the preferred stock, and as part of the agreement for the acquisition of certain assets of Royal App, Ltd., the Company also agreed to issue common stock for commission fees of 2% of the Company’s common stock on a diluted basis, and to the employees of Stratford as to 8% of the Company on a diluted basis, under the terms of an Employee Stock Option Plan, once approved by Shareholders. Further, in order to undertake these issuances, the Company was required to increase the authorized common stock of the Company.
On June 9, 2021, the Company announced a Stockholders’ meeting to be held on June 30, 2021 to approve the following actions:
| · | An amendment to the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000. |
| · | An amendment to the articles of the Company to effect a reverse stock split on the basis of not less than 1 for 10 and not more than 1 for 100. Such ratio to be determined by the Board of Directors of the Company, at such time as it is approved by the Board of Directors of the Company. |
| · | Approval of a 2021 Employee Stock Incentive Plan. The Plan will have available shares equity to 25% of the Company’s capitalization and a term of ten years from the effective date of the Plan. |
| · | Approval of the Company’s reorganization from Oregon to Delaware. |
The meeting was held on June 30, 2021, and the Company’s shareholders approved all of the actions detailed above, as well as the conversion of 1,000 outstanding shares of Company’s Series A convertible preferred stock whereby each 1 share of Preferred stock held is convertible into 71,683.25 shares of common stock. As a result, during the period ended September 30, 2021, the holders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of SAFES were converted into a total of 126,614,436 shares of common stock at $0.02567 per share.
During the year ended December 31, 2021, the Company closed an additional $1,881,000 as part of our PIPE offering, by way of the sale of an additional 25,080,000 Units at $0.075 per Unit, each Unit consisting of one share of common stock and one-half warrant for exercise at $0.0975 per share. The Company paid agent commissions on $1.376 M in proceeds at 4.25% for a total of $58,480 in financing costs.
The Company granted 7,791,658 Stock Purchase Warrants to one of its financing agents, exercisable for a period of two years from the date of grant at $0.02567 per share. The Company recorded $854,632 in financing costs.
During the year ended December 31, 2021, the Company granted the following stock options under its 2021 Stock Incentive Plan:
| - | 9,000,000 fully vested incentive stock options to directors, officers and consultants of the Company for exercise at $0.02567 for a term of 4 years from grant. |
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| - | 7,077,422 qualified employee stock options to certain officers, directors and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.123 per share for a period of (4) four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the options vesting at the end of each three (3) month period following the Cliff Date. The options shall become fully vested by the fourth anniversary of the vesting commencement date, with a vesting commencement date of October 26, 2021. |
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| - | 11,465,424 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd., with an exercise price of $0.02567 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date, with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of May 2, 2021. |
During the three months ended March 31, 2022, the Company received a total of $400,000 in proceeds from Short Term Promissory Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date. The Company issued a total of 1,666,665 warrants in respect to the aforementioned Notes.
In June 2022, the Company received $100,000 in the form of a short-term promissory note from a company controlled by our President, with a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash.
In June 2022 the Company accepted a further $70,000 in proceeds in the form of Short-Term Promissory Notes from a company controlled by our President, having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash. The Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date. The Company issued a total of 291,667 warrants in respect to the aforementioned Notes, which warrants were subsequently canceled.
During the nine months ended September 30, 2022, the Company granted a total of 3,333,748 qualified stock options to certain employees of controlled subsidiary Stratford and 6,829,712 options were forfeited upon termination of certain employment agreements.
On August 1, 2022, the Company officially launched its updated mobile commerce platform on the Shopify App Store, with its first user. The Shelfy app is now open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy.
At the beginning of September 2022, the Company officially launched its mobile commerce platform for WooCommerce on the WordPress.ORG Plugins Store. The Shelfy Mobile App Builder is now available to all WooCommerce developers, online stores, brands, and retailers at https://he.wordpress.org/plugins/shelfy-mobile-commerce-platform/.
Between June 30, 2022 and October 18, 2022, the Company received a total of $869,000 in cash proceeds from certain Note and Securities Purchase Agreements (the “Offering Notes”), and rolled over $570,000 of previously incurred debt under certain notes entered into during the first quarter, including accrued interest (the “New Notes”), with each of the Offering Notes and New Notes having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 10,214,547 shares of common stock to the Noteholders in conjunction with the terms of the agreements. The Company paid commissions of approximately $63,000 in respect to the aforementioned transactions, of which $48,818 was paid to a company controlled by our acting CEO.
Uncertainties in our Business
We believe that the key uncertainties in our business are as follows:
| ● | We believe that expanding our marketing team, which may result in significant advertising expenses, will be necessary in order to increase product awareness in order to compete with our competitors, including large and well established brands with access to significant capital resources |
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| ● | Customer trends and tastes can change for a variety of reasons including government regulations and variation in demographics. We will need to be able to adapt to changing preferences in the future. |
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| ● | Our sales growth is dependent upon maintaining our relationships with existing and future customers, which includes sales to large retailers. |
Results of Operations
Three Months Ended September 30, 2022 and 2021
Revenue
We have generated $18,525 in revenue during the three months ended September 30, 2022 compared to $74,025 during the three months ended September 30, 2021.
Net Loss
We had a net loss of $1,057,397 in the three months ended September 30, 2022 compared to a net loss of $656,430 in the three months ended September 30, 2021, as follows:
| | Three months ended September 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Revenues | | $ | 18,525 | | | $ | 74,025 | |
| | | | | | | | |
Operating expenses | | $ | | | | $ | | |
General and administrative | | | 234,568 | | | | 268,491 | |
Management Fees | | | 80,357 | | | | 142,267 | |
Research and Development | | | - | | | | 266,342 | |
Sales and Marketing | | | 41,130 | | | | 43,439 | |
Finance Costs | | | 719,867 | | | | 9,916 | |
Total operating expenses | | | 1,075,922 | | | | 730,455 | |
| | | | | | | | |
Net Loss | | $ | (1,057,397 | ) | | $ | (656,430 | ) |
Operating Expenses
Total operating expenses for the three months ended September 30, 2022 were $1,075,922 compared to total operating expenses of $730,455 for the three months ended September 30, 2021. The increase in operating expenses during the three months ended September 30, 2022 is predominantly the result of a substantial increase in Finance costs over the period from $9,916 for the three months ended September 30, 2021 to $719,867 for the three months ended September 30, 2022. The Company expended $234,568 in the current three months ended September 30, 2022, compared to $268,491 in the prior three month period ended September 30, 2021 on general and administrative expenses, including salaries, $41,130 on sales and marketing compared to $43,439 in the prior comparative three month period, and $80,357 on management fees compared to $142,267 in the prior comparative three months. Finance costs of $719,867 related to shares issued for financing costs with respect to the issuance of certain notes payable in the current three month period, as compared to finance costs of $9,916 in the three months ended September 30, 2021 related to certain commission fees paid and costs related to the issuance of agent warrants.
Nine Months Ended September 30, 2022 and 2021
Revenue
We have generated $56,668 in revenue during the nine months ended September 30, 2022, compared to $124,008 during the nine months ended September 30, 2021.
Net Loss
We had a net loss of $2,249,753 in the nine months ended September 30, 2022, compared to a net loss of $1,567,563 in the nine months ended September 30, 2021, as follows:
| | Nine months Ended September 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Revenues | | $ | 56,668 | | | $ | 124,008 | |
| | | | | | | | |
Operating expenses | | | | | | | | |
General and administrative | | $ | 1,040,294 | | | $ | 565,645 | |
Management Fees | | | 336,905 | | | | 223,708 | |
Research and Development | | | - | | | | 448,078 | |
Sales and Marketing | | | 142,925 | | | | 78,284 | |
Finance Costs | | | 901,158 | | | | 375,856 | |
Total operating expenses | | | 2,421,282 | | | | 1,691,571 | |
| | | | | | | | |
Income tax refund | | | 114,861 | | | | - | |
Net Loss | | $ | (2,249,753 | ) | | $ | (1,567,563 | ) |
Operating Expenses
Total operating expenses for the nine months ended September 30, 2022 were $2,421,282 compared to total operating expenses of $1,691,571 for the nine months ended September 30, 2021. The increase in operating expenses during the nine months ended September 30, 2022 is predominantly the result of a substantial increase to general and administrative costs and management fees over the current period. The Company expended $1,040,294 in the current nine months ended September 30, 2022, compared to $565,645 in the nine month period ended September 30, 2021 on general and administrative expenses, including salaries, $142,925 on sales and marketing compared to $78,284 in the prior comparative nine month period, and $336,905 on management fees compared to $223,708 in the prior comparative nine months. Finance costs of $901,158 related primarily to the value of stock purchase warrants and shares of common stock issued as financing costs in respect to certain notes payable in the current nine month period, as compared to finance costs of $375,856 in the nine months ended September 30, 2021 related to certain commission fees paid in respect to a financing by way of sales of restricted shares common stock , and costs related to the associated issuance of agent warrants.
Operating Activities
Net cash used in operating activities was $853,586 for the nine months ended September 30, 2022 compared to net cash used in operating activities of $944,465 for the nine months ended September 30, 2021. Net cash used in operating activities for the nine months ended September 30, 2022 was primarily the result of the net loss, offset by non-cash financing fees of $804,567, stock based compensation of $441,071, depreciation of $4,787 and non-cash lease expenses of $970, as well as changes to operating assets and liabilities, including an increase to accounts receivable of $14,282, a decrease to prepaid expenses of $33,359, and an increase to accounts payable of $125,695. Net cash provided by operating activities for the nine months ended September 30, 2021 was primarily the result of the net loss, offset by non-cash financing fees of $283,096, and changes to operating assets and liabilities, including an increase to accounts payable of $422,316, an increase to accounts receivable of $9,622 and an increase to prepaid expenses of $32,002, and an increase to other current assets of $40,690.
Investing Activities
The Company purchased assets for a cash value of $17,641 and capitalized certain intangible assets of $1,052,395 during the nine months ended September 30, 2022. During the comparative nine months ended September 30, 2021 the Company capitalized certain intangible assets totaling $2,147,661.
Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2022 totaled $1,389,000 comprised of $570,000 in proceeds from certain short term notes payable and proceeds from long term debt of $819,000 as compared to $3,525,000 in proceeds from the sale of restricted common shares at $0.02567 under our SAFE offering in the nine months ended September 30, 2021.
For the years ended December 31, 2021 and December 31, 2020
Results of Operations
Revenue
During the years ended December 31, 2021 and 2020, we generated $170,622 and $0 of revenue, respectively.
Operating Expenses
For the years ended December 31, 2021 and 2020 we had the following operating expenses:
| | Years Ended December 31, | |
| | 2021 | | | 2020 | |
| | | | | | |
Operating expenses | | | | | | |
General and administrative | | $ | 1,718,058 | | | $ | 5,236 | |
Management Fees | | | 294,101 | | | | 48,000 | |
Sales and Marketing | | | 205,467 | | | | - | |
Finance Costs | | | 1,294,976 | | | | - | |
Total operating expenses | | | 3,512,602 | | | | 53,236 | |
| | | | | | | | |
Net Loss | | $ | (3,341,980 | ) | | $ | (53,236 | ) |
Total operating expenses for the year ended December 31, 2021 were $3,512,602 compared to $53,236 for the year ended December 31, 2020. During the year ended December 31, 2021 the Company incurred $1,718,058 in general and administrative expenses including salaries, office rent, consulting fees, professional fees and other operating expenses. In addition, the Company reported a total of $294,101 in management fees paid to officers, directors and executives, $205,467 in sales and marketing costs and $1,294,976 in finance costs related to cash payments and the issuance of warrants to certain agents in respect to our SAFE and PIPE offerings. Comparatively, during the year ended December 31, 2020, the Company incurred $48,000 in directors fees and $5,236 in general and administrative expenses.
Net Loss
We had a net loss of $3,341,980 in the year ended December 31, 2021 compared to a net loss of $53,236 in the year ended December 31, 2020.
Statement of Cash Flows
The following table summarizes our cash flows for the period presented:
| | For the Year ended December 31, | |
| | 2021 | | | | 20 | |
Net cash provided (used by) operating activities | | $ | (805,402 | ) | | $ | 22,961 | |
Net cash provided from (used by) investing activities | | | (3,417,237 | ) | | | - | |
Net cash provided from financing activities | | | 5,131,000 | | | | - | |
Increase (decrease) in cash and cash equivalents | | $ | 908,361 | | | $ | 22,961 | |
Cash Provided by (Used in) Operating Activities
During the year ended December 31, 2021, net cash used in operating activities totaled $805,402, which consists of our net loss of $3,341,980, offset by noncash adjustments of $1,137,728 in financing costs, $1,144,077 in stock-based compensation, noncash operating lease expenses of $556 and depreciation of $328. Changes in operating assets included an increase to accounts receivable of $18,238, an increase to prepaid expenses of $229,982 and an increase to accounts payable of $502,109. During the year ended December 31, 2020 cash provided by operating expenses totaled $22,961and consisted of our net loss of $53,236 offset by a decrease in prepaid costs of $27,000 as prior issued deposits were returned to the Company, and an increase to accounts payable of $49,197.
Cash Provided by Investing Activities
Cash used in investing activities in the year ended December 31, 2021 totaled $3,417,237 as compared to $0 in the year ended December 31, 2020 and include $7,331 for the purchase of property and equipment and $3,409,906 with respect to the acquisition of certain intangible assets through a bankruptcy proceeding.
Cash Provided by Financing Activities
Cash provided by financing activities totaled $5,131,000 in the year ended December 31, 2021 as a result of the sale of common shares and units under a SAFE and PIPE during the year, as compared to $0 in the prior comparative year ended December 31, 2020.
Liquidity and Capital Resources
As at September 30, 2022, we had cash of $431,922. We are in the early stage of development having acquired certain intellectual property assets through a bankruptcy proceeding during fiscal 2021 that the Company has only recently begun to operate. We have experienced net losses to date and have generated modest revenue from operations in the three and nine months ended September 30, 2022, which raises substantial doubt about our ability to continue as a going concern. While we have raised additional proceeds totaling $1,389,000 in the nine months ended September 30, 2022 by way of notes payable and certain note and securities purchase agreements, these funds are not sufficient to meet ongoing operations expenses. We will require substantial additional funds for operations in order to meet our software marketing and business expansion objectives in fiscal 2022 and beyond. There can be no assurance that financing, whether debt or equity, will be available to us in the amount required at any particular time or for any particular period or, if available, that it can be obtained on terms favorable to us. If additional funds are raised by the issuance of equity securities, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other equity instruments, we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing stockholders. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources.
As we monitor the full impact of the COVID-19 outbreak, we continue exploring sources of debt and equity financings as well as available grants. There can be no assurance the necessary financing will be available to meet our timeline. We expect to continue to onboard additional customers for our existing software suite and our new software offering once launched in the fall of fiscal 2022, however we do not believe revenues from operations in fiscal 2022 will be sufficient to meet our operational overhead. We currently believe that the Company’s cash requirement during the following twelve months is approximately $6,000,000. Without additional financing, we do not believe our resources will be sufficient to meet our operating and capital needs for the remaining months of fiscal 2022 and fiscal 2023.
Additional financing
During the nine months ended September 30, 2022 we received $400,000 in proceeds from certain short term notes payable and a further $170,000 in short term notes payable from companies controlled by our President, Mr. Elchanan Maoz. Subsequently we have received a further $869,000 in proceeds in respect to a Note Offering conducted subsequent during the period ended September 30, 2022.
Working Capital
| | September 30, 2022 | | | December 31, 2021 | |
Current assets | | $ | 803,245 | | | $ | 1,558,768 | |
Less: current liabilities | | | 635,903 | | | | 582,155 | |
Working capital (deficit) | | $ | 167,342 | | | $ | 976,613 | |
Current assets are primarily comprised of cash, customer accounts receivable, prepaid expenses and other current assets including refundable taxes (VAT).
Current liabilities consist of short term notes payable, accounts payable and accrued liabilities and the current portion of lease liabilities.
Going Concern
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. Our report from our independent registered public accounting firm for the fiscal year ended December 31, 2021 includes an explanatory paragraph stating the Company has recurring losses and limited operations which raise substantial doubt about its ability to continue as a going concern. If the Company is unable to obtain adequate capital, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Off-Balance Sheet Arrangements
As of September 30, 2022, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated under which it has:
| ● | a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit; |
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| ● | liquidity or market risk support to such entity for such assets; |
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| ● | an obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument; or |
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| ● | an obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to us, where such entity provides financing, liquidity, market risk or credit risk support to or engages in leasing, hedging, or research and development services with us. |
Effects of Inflation
We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our consolidated financial statements included herein for the nine months ended September 30, 2022 and the year ended December 31, 2021.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “General and Administrative” on the Company’s consolidated statements of operations.
Intangible Assets
The Company recognizes assets for customer relationships, developed technology, post technological feasibility software development costs, patents and finite-lived trade names. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from 3 to 8 years. Amortization for developed technology is recognized in cost of revenue. Amortization for trade names is recognized in sales and marketing expenses.
In the year ended December 31, 2021, the Company recorded assets acquired in the cumulative amount of approximately $3.4 million (cash proceeds, share based consideration and the assumption of certain repayable grants issued by the government of Israel which financed certain development activities related to the intellectual property) purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. Intangible assets acquired included intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property and the future estimated value of certain customer relationships. We initially record acquired intangible assets at their estimated fair values and we review these assets periodically for impairment.
Software Development Expenditure
Software development expenditures consist primarily of costs associated with the on-going modifications to certain software acquired from Royal App including employee compensation and certain stock based compensation associated with certain employee contracts, as well as other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development incurred pre-technological feasibility are expensed as incurred. Post- technological feasibility expenditures are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.4 million purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. During the year ended December 31, 2021, we capitalized approximately $990,000 in ongoing research and development expenditures incurred post technological feasibility, and $28,483 in patent related expenditures. During the nine months ended September 30, 2022, we capitalized an additional $1,422,000 in ongoing development expenditures as we continued to complete the programming required for the transfer of IOS and Android operating systems to Flutter and integrate our SAAS product with the major online retailing platforms Shopify and Woocommerce
Impairment
We account for indefinite-lived intangible assets using the accounting guidance in ASC 350-30-35. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result the Company presently has the option to bypass the qualitative assessment and perform the quantitative assessment.
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level.
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
· | Identification of the contract, or contracts, with a customer; |
· | Identification of the performance obligations in the contract; |
· | Determination of the transaction price; |
· | Allocation of the transaction price to the performance obligations in the contract; and, |
· | Recognition of revenues when, or as, the Company satisfies a performance obligation. |
Subscription Revenues
Subscription revenues primarily consist of monthly fees for providing customers access to our software apps including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is different than the next with prices increasing as the functionality increases.
Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.
Customized Professional Service Revenues
Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the services are performed.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Acquisition
On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to acquire certain assets of Royal App, Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash, the assumption of certain repayable government grants with an approximate value of $200,000 USD, as well as 8% equity in the Company on a diluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition.
Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile enterprise software platform that helps retailers and fast moving consumer goods companies become growth companies. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients. Concurrent with the acquisition of the Shelfy software assets, management determined the technological feasibility of proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering, initially integrated on key reseller platforms, with the intent of repositioning the software with an entirely new and much larger market base. An easy to use, fully customizable mobile commerce app for download by consumers across all industry segments for a base monthly subscription fee, and readily available add on features for additional monthly fees based on individual consumer selections.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFE”) from institutional investors and family offices. The terms of the SAFE required that they automatically converted into common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock.
As a result, during the year ended December 31, 2021, the holders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of the SAFE offering were converted into a total of 126,614,436 shares of common stock at $0.02567 per share.
As of the date of this prospectus, no additional shares shall be issued to the Trustee as part of the asset acquisition, and no additional “anti-dilution” shares were issued to the Trustee as part of the PIPE or SAFE offerings, and no additional anti-dilution shares will be issued as part of this offering. There will be no anti-dilution that will occur as part of this offering due to the acquisition transaction described above.
Capital Expenditures
Other Capital Expenditures
We expect to incur research and development costs, as well as marketing expenses in connection with the expansion of our business and the development of our products.
Future Contractual Obligations and Commitment
We incur contractual obligations and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contracts, such as debt and lease agreements. These obligations may result from both general financing activities and from commercial arrangements that are directly supported by related operating activities.
As of September 30, 2022, we have approximately $170,000 in repayable Israeli government grants which are recorded on our balance sheets as an accrued liability. The grants have no specific terms of repayment and are payable as revenues are generated from our acquired assets at a rate of 3.00% of gross sales proceeds.
BUSINESS
Overview
Our Mission.
We enable retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online – no code required.
Our Objective
Metro One Telecommunications, Inc. is focused on changing the way retailers integrate mobile commerce solutions within their business. Our multi-model, plug and play mobile commerce platform enables retailers to launch their own branded mobile application serving as an additional sales channel in a matter of a few hours – no code required.
Through our recently acquired Israeli tech company, Stratford, Ltd, the company will continue to merge the functionality of mobile technology, AI, and Machine learning enabling retailers to quickly and easily bring their business online with a goal to significantly:
| · | Increase customer retention (60%) |
| · | Increase average basket size (30%) |
| · | Increase Upsell and Cross-sell x4 |
| · | Increase customers lifetime value CLV – drastic increase in repeat monthly purchases |
Corporate History
Metro One was originally incorporated in the state of Oregon in 1995. On August 9, 2021, the Company reorganized and filed articles of conversion to be registered under the laws of the state of Delaware.
On April 16, 2008, we were notified by The Nasdaq Stock Market that we were not in compliance with Nasdaq Marketplace Rule 4310(c)(4) (the “Minimum Bid Price Rule”) because shares of our common stock had closed at a per share bid price of less than $1.00 for 30 consecutive business days. In accordance with Marketplace Rule 4310(c)(8)(D), we had been provided 180 calendar days, or until October 13, 2008, to regain compliance with the Minimum Bid Price Rule. In addition, on May 22, 2008, we were notified by The Nasdaq Stock Market that we no longer were in compliance with Nasdaq Marketplace Rule 4310(c)(3) and were subject to delisting from the Nasdaq Capital Market. Marketplace Rule 4310(c)(3) requires that we maintain stockholders’ equity of at least $2.5 million, or a market value of our listed securities of at least $35.0 million, or have net income from continuing operations of at least $500,000 during the last fiscal year or two of the last three fiscal years. On July 25, 2008, we received a Nasdaq staff determination letter rejecting the plan we had submitted to evidence our ability to achieve compliance with the requirements for continued listing on The Nasdaq Capital Market set forth in Nasdaq Marketplace Rule 4310(c)(3). We appealed the Nasdaq staff’s determination to delist our securities from The Nasdaq Capital Market effective August 5, 2008, and were scheduled for a hearing before a NASDAQ Listing Qualifications Panel (the “Panel”) on September 18, 2008. However, on September 16, 2008, we notified the Panel that we were withdrawing our appeal of the July 25, 2008 Nasdaq staff determination. Accordingly, our common stock was suspended from trading effective at the open of business on Friday, September 19, 2008. The common stock was subsequently delisted on October 7, 2008, when the SEC completed its formal notification of removal from listing. On March 5, 2009 the company filed a Form 15 terminating its registration under Section 12(g) of the Securities Exchange Act.
During fiscal 2009 through the end of fiscal 2020, the Company determined to wind-down its former operations and subsequently began seeking a viable project of merit. Upon the recent acquisition of the assets of Royal App in early 2021, the Company has returned to active operations.
Our principal executive offices are located at 30 North Gould Street, Suite 2990, Sheridan, WY 82801, our phone number is (307)-683-0855, our corporate website is www.metro1telecomm.com and our product website is www.shelfy.io.
We currently have one subsidiary, Stratford, Ltd., incorporated in Israel.
Principal products
| · | Mobile Commerce Merchant Platform: Enabling SMB retailers to launch a fully branded and functional mobile app with tons of unique and patented features. Great for retailers with at least 200+ return customers. Our patented UX/UI features are available on both IOS and Android and include unique features such as voice search, shoppable videos, and barkers for upselling. Our Mobile Commerce Merchant Platform is operational. |
| | |
| · | Mobile Commerce Enterprise Platform: Enabling Enterprise retailers who own and operates both brick and mortar store as well as e-commerce platforms to better engage with their customer both online and in-store via the customer’s mobile application. Our Mobile Commerce Enterprise Platform is not yet operational, but we expect to launch this product during the fourth quarter of 2022. |
| · | Instore Engagement Suite: providing a purely customer-centric approach to shopping. Our Scan, Pay & Go reduces the customer’s shopping time by approximately 40%. Imagine no more waiting in lengthy lines, no more time and effort spent on packing, unpacking and packing again … and for retailers, an effective way to reduce cost on hardware acquisition and maintenance. Additional instore features will include In-store navigation, in-store personalized shopping experience, and in-store customer loyalty program activation. During this phase, we might consider the M&A of small startups with unique technological features enriching our suite of products without having to develop from scratch. Our Instore engagement Suite is not yet operational, but we expect to launch this product during the second quarter of 2023. |
Competitive Strengths
It is important to emphasize that we are not app developers -hence our direct competitors are not other app developers. What we provide is a mobile commerce platform that provides retailers software that enables them to build their own application without one line of code or any development needed from their side.
We differentiate our products primarily through functional points of difference between our products and those of our competitors, including:
| - | Intuitive drag and drop dashboards that enable merchants to build their own branded mobile application |
| | |
| - | Patented single product display graphical user interface – called the shelf that makes mobile shopping truly mobile and is truly unique to our application |
| | |
| - | An advanced in app marketing suite consisting of features such as shoppable videos and barkers, significantly increasing up selling and cross selling. |
Marketing, Sales and Customer Service
Due to the dynamic nature of SaaS platforms and the market sector we are targeting, we have decided to focus on being a product-led company, and merge the marketing, sales and customer success teams into one department, providing a complete customer-centric approach. This approach gives us a 360 view of the customer journey and ensures that we can act in real-time to acquire new customers and provide the relevant support when and where needed to retain the customers we have acquired. Using the latest marketing discipline called Product led Growth Hacking and automation we will be able to support and focus on rapid and optimized growth. Consisting of both a process and a set of cross-disciplinary (digital) skills. The goal is to regularly conduct A/B testing that will lead to improving the customer journey and replicate and scale the ideas that work and modify or abandon the ones that don’t before spending vast amounts of resources. Once a plan has been validated, it is automated and the system works by itself reducing overheads and lowering the cost of customer acquisition (CAC).
To ensure we give retailers the optimal results when using our platform, our focus will not merely be on sales cycles but creating a community where they can learn and grow with plenty of engagement and educational information such as blogs, webinars, and affiliation programs.
Experienced Leadership Team
The combination of operating skills from our management team with the experience of successfully leading major retail and mobile commerce companies gives our organization a significant strength relative to most small- and medium-sized companies.
Growth Strategies
Our primary long-term goal is to become one of the market leaders within the mobile commerce sector, providing an additional sales channel which merchants and retailers of all sizes can add to their existing business. We intend to achieve this goal by driving organic growth through our third-party integrated platforms, across all major retail channels where repeat purchases occur and in all major markets where e-commerce has been adapted and in markets where the use and launch of e-commerce shops are on the rise.
Our key growth strategies include the following:
· | developing a powerful, performance-oriented, and metric-driven organizational culture; |
| |
· | developing automated marketing, sales and customer service tool kits to empower our sales force network to engage with global customers; |
| |
· | developing brand/marketing tool kits for current and new products and segments, to make onboarding as efficient and seamless as possible; |
| |
· | launching and expanding our SaaS products domestically and internationally; |
| |
· | strengthening our supply chain to achieve best in class costs, on-time/as promised products and customer service; |
| |
· | improving margins with improved efficiency, and improved net revenue per case with new products; |
| |
· | upgrading infrastructure, systems and processes with enterprise resource planning systems, improved financial reporting, operating expense control, and strengthened key metrics and accounting and control procedures; and |
| |
· | strengthening our financial foundation via accessing the capital markets, solidifying long-term banking partners and facilities, and pursuing transformative organic and external growth. |
Recent Developments
In May 2022 the Company received approval to publish its mobile commerce platform on the Shopify App Store. Shopify is a leading global commerce company, providing retailers with trusted tools to start, grow, market, and manage their businesses.
In June 2022, the Company received approval to publish its mobile commerce platform on WordPress.ORG as a WooCommerce Plugin. WordPress, currently in use by 43% of all websites, is one of the most popular open-source content management system solutions according to W3 Techs. WooCommerce, a WordPress plugin, offers flexible, open-source commerce solutions for WordPress websites, empowering small and medium-sized businesses to build the store they want and sell online. With more than 5 million active installations of the WooCommerce plugin reported on wordpress.org, statista.com indicates WooCommerce commands more than 23% of the global eCommerce market share. Shelfy.io is a patented mobile app builder plugin for WooCommerce.
On August 1, 2022, the Company officially launched its fully updated mobile commerce platform on the Shopify App Store, with its first user. The Shelfy app is now open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy. At the beginning of September, the Company officially launched its mobile commerce platform for WooCommerce on the WordPress.ORG Plugins Store. The Shelfy Mobile App Builder is now available to all WooCommerce developers, online stores, brands, and retailers at https://he.wordpress.org/plugins/shelfy-mobile-commerce-platform/.
Sales and Marketing
We currently have an in-house sales and merchandising team whose compensation is highly variable and highly performance-based. Each sales person has individual targets for increasing “base” volume through distribution expansion, and “incremental” volume. As distribution to new major customers, new major channels, or new major markets increases, we will expand the sales and marketing team on a variable basis.
We market our products using a range of marketing mediums including in-store merchandising and promotions, experiential marketing, events, and sponsorships, digital marketing and social media, direct marketing, and traditional media including print, radio, outdoor, and TV.
Competition
The mobile commerce industry is highly competitive. We face intense competition from very large, international corporations, as well as from local and national companies. In addition, we face competition from well-known companies that have large market share.
The intensity of competition in the future is expected to increase and no assurance can be provided that we can sustain our market position or expand our business.
Many of our current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and name recognition than we have. However, we believe that with our specialized platform and considering that the mobile commerce sector is growing we will have the ability to obtain a large market share, and continue to generate sales and compete in this industry.
Patents and Trademarks
We hold various trademarks and patents in various jurisdictions, all of which were acquired through the liquidation proceedings for Royal App, Ltd. Any encroachment upon our proprietary information, including the unauthorized use of our brand name, the use of a similar name by a competing company or a lawsuit initiated either by us or against us for infringement upon proprietary information or improper use of a trademark, may affect our ability to create brand name recognition, cause customer confusion and/or have a detrimental effect on our business due to the cost of defending any potential litigation related to infringement. Litigation or proceedings before the U.S. or International Patent and Trademark Offices may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and/or to determine the validity and scope of the proprietary rights of others. Any such litigation or adverse proceeding could result in substantial costs and diversion of resources and could seriously harm our business operations and/or results of operations.
Our patents and trademarks are set out below:
33
Government and Industry Regulation
We are subject to a variety of federal, state and local laws and regulations in the U.S. These laws and regulations apply to many aspects of our business including the manufacture, safety, labeling, transportation, advertising and sale of our products. Violations of these laws or regulations in the advertising of our products could damage our reputation and/or result in regulatory actions with substantial penalties.
We are also subject to the Securities Act, the Securities and Exchange Act of 1934, and Delaware General Corporation Law. We will also be subject to common business and tax rules and regulations pertaining to the operation of our business, such as the United States Internal Revenue Tax Code and the Delaware State Tax Codes, as well as international tax codes. We will also be subject to proprietary regulations such as United States Trademark and Patent Law as it applies to the intellectual property of third parties. We believe that the effects of existing or probable governmental regulations will be additional responsibilities of management to ensure that we are in compliance with securities regulations as they apply to our products as well as ensuring that we do not infringe on any proprietary rights of others with respect to our products. We will also need to maintain accurate financial records in order to remain compliant with securities regulations as well as any corporate tax liability we incur.
Employees
As of the date of this prospectus, Metro One has no employees, our acting Chief Executive Officer, Mr. Elchanan Maoz, and our board of directors, acting as consultants manage our operating activities. Our operating subsidiary, Stratford Ltd., has 15 full time employees 2 full-time subcontractors and 3 part time consultants, managed by its Chief Executive Officer, Ami Bukris.
Property
Our operations internationally are registered at Raoul Wallenberg 18, Building D, 6th Floor, Ramat Hachayal, Tel Aviv, Israel. Stratford Ltd. has several short-term lease agreements with Regus Co-Working Offices with month to month and six-month durations. The location of the leased offices is Atrium Tower, 18th floor, Zeev Jabotinsky St 2, Ramat Gan, 5250501, Israel. The cumulative monthly lease fees are approximately $10,770 USD for a total of approximately 600 square feet... Our principal executive offices are located at 30 North Gould Street, Suite 2990, Sheridan, WY 82801, for which we pay $30.00 per month on a month-to-month basis. We consider the current space to be adequate and will reassess our needs based upon future growth.
INDEX TO THE FINANCIAL STATEMENTS
Metro One Telecommunications, Inc.
TABLE OF CONTENTS FOR UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022 and 2021
Metro One Telecommunications, Inc.
Condensed Consolidated Balance Sheets
| | September 30, 2022 | | | December 31, 2021 | |
Assets | | (Unaudited) | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 431,922 | | | $ | 1,128,825 | |
Accounts receivable | | | 29,780 | | | | 18,865 | |
Prepaid expenses | | | 136,619 | | | | 180,808 | |
Other current assets | | | 204,924 | | | | 230,270 | |
Total current assets | | | 803,245 | | | | 1,558,768 | |
| | | | | | | | |
Property and equipment. net | | | 20,133 | | | | 7,244 | |
Intangible assets | | | 5,844,583 | | | | 4,422,352 | |
Operating lease right-of-use assets | | | 20,820 | | | | 34,432 | |
Other assets | | | 19,127 | | | | 21,911 | |
Total assets | | $ | 6,707,908 | | | $ | 6,044,707 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity (Deficit) | | | | | | | | |
| | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 624,120 | | | $ | 569,320 | |
Current portion of operating lease liabilities | | | 11,783 | | | | 12,835 | |
Total current liabilities | | | 635,903 | | | | 582,155 | |
| | | | | | | | |
Debt | | | 1,409,221 | | | | - | |
Other liability | | | 170,130 | | | | 194,898 | |
Operating lease liabilities | | | 10,444 | | | | 22,173 | |
Total liabilities | | | 2,225,698 | | | | 799,226 | |
| | | | | | | | |
Stockholders’ equity (deficit) | | | | | | | | |
Common stock, $0.0001 par value; 600,000,000 shares authorized. 267,785,247 and 257,920,700 shares issued and outstanding as at September 20, 2022 and December 31, 2021, respectively | | | 26,779 | | | | 25,792 | |
Additional paid in capital | | | 142,473,281 | | | | 140,858,794 | |
Accumulated deficit | | | (137,866,780 | ) | | | (135,617,027 | ) |
Other comprehensive income | | | (151,070 | ) | | | (22,078 | ) |
Stockholders’ equity (deficit) | | | 4,482,210 | | | | 5,245,481 | |
Total Liabilities and Stockholders’ Deficit | | $ | 6,707,908 | | | $ | 6,044,707 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Operations
and Other Comprehensive Income
(Unaudited)
| | Three months ended September 30, | | | Nine months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | |
Revenues | | $ | 18,525 | | | $ | 74,025 | | | $ | 56,668 | | | $ | 124,008 | |
| | | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | | |
General and administrative | | | 234,568 | | | | 268,491 | | | | 1,040,294 | | | | 565,645 | |
Management Fees | | | 80,357 | | | | 142,267 | | | | 336,905 | | | | 223,708 | |
Research and Development | | | - | | | | 266,342 | | | | - | | | | 448,078 | |
Sales and Marketing | | | 41,130 | | | | 43,439 | | | | 142,925 | | | | 78,284 | |
Finance Costs | | | 719,867 | | | | 9,916 | | | | 901,158 | | | | 375,856 | |
Total operating expenses | | | 1,075,922 | | | | 730,455 | | | | 2,421,282 | | | | 1,691,571 | |
| | | | | | | | | | | | | | | | |
Income tax refund | | | - | | | | - | | | | 114,861 | | | | - | |
Net Loss | | $ | (1,057,397 | ) | | $ | (656,430 | ) | | $ | (2,249,753 | ) | | $ | (1,567,563 | ) |
| | | | | | | | | | | | | | | | |
Basic and diluted net loss per common share | | $ | (0.00 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.04 | ) |
| | | | | | | | | | | | | | | | |
Weighted average shares – basic and diluted | | | 260,835,309 | | | | 107,862,699 | | | | 258,902,913 | | | | 40,607,967 | |
| | | | | | | | | | | | | | | | |
Other Comprehensive Income (loss) | | | | | | | | | | | | | | | | |
Net Loss | | $ | (1,057,397 | ) | | $ | (656,430 | ) | | $ | (2,249,753 | ) | | $ | (1,567,563 | ) |
Foreign currency translation adjustment | | | 7,405 | | | | (2,263 | ) | | | (128,992 | ) | | | (8,089 | ) |
| | $ | (1,049,992 | ) | | $ | (658,693 | ) | | $ | (2,378,745 | ) | | $ | (1,575,652 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
| | Common Stock | | | Additional Paid-in | | | Accumulated Other Comprehensive | | | Accumulated | | | Total Stockholders’ Equity | |
| | Shares | | | Amount | | | Capital | | | Income (loss) | | | Deficit | | | (Deficit) | |
Balance at December 31, 2021 | | | 257,920,700 | | | $ | 25,792 | | | $ | 140,858,794 | | | $ | (22,078 | ) | | $ | (135,617,027 | ) | | $ | 5,245,481 | |
Stock warrants granted as financing costs | | | - | | | | - | | | | 140,767 | | | | - | | | | - | | | | 140,767 | |
Stock based compensation | | | - | | | | - | | | | 241,514 | | | | - | | | | - | | | | 241,514 | |
Capitalized stock-based compensation | | | - | | | | - | | | | 157,602 | | | | - | | | | - | | | | 157,602 | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | (27,245 | ) | | | - | | | | (27,245 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | (633,515 | ) | | | (633,515 | ) |
Balance at March 31, 2022 | | | 257,920,700 | | | | 25,792 | | | | 141,398,677 | | | | (49,323 | ) | | | (136,250,542 | ) | | | 5,124,604 | |
Stock warrants granted as financing costs | | | - | | | | - | | | | 24,835 | | | | - | | | | - | | | | 24,835 | |
Stock based compensation | | | - | | | | - | | | | 147,440 | | | | - | | | | - | | | | 147,440 | |
Capitalized stock-based compensation | | | - | | | | - | | | | 107,654 | | | | - | | | | - | | | | 107,654 | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | (109,152 | ) | | | - | | | | (109,152 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | (558,841 | ) | | | (558,841 | ) |
Balance at June 30, 2022 | | | 257,920,700 | | | | 25,792 | | | | 141,678,606 | | | | (158,475 | ) | | | (136,809,383 | ) | | | 4,736,540 | |
Stock issued as financing costs | | | 9,864,547 | | | | 987 | | | | 637,978 | | | | - | | | | - | | | | 638,965 | |
Stock based compensation | | | - | | | | - | | | | 52,117 | | | | - | | | | - | | | | 52,117 | |
Capitalized stock-based compensation | | | - | | | | - | | | | 104,580 | | | | - | | | | - | | | | 104,580 | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | 7,405 | | | | - | | | | 7,405 | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | (1,057,397 | ) | | | (1,057,397 | ) |
Balance at September 30, 2022 | | | 267,785,247 | | | $ | 26,779 | | | $ | 142,473,281 | | | $ | (151,070 | ) | | $ | (137,866,780 | ) | | $ | 4,482,210 | |
| | Preferred Shares* | | | Common Stock | | | Additional Paid-in | | | Accumulated Other Comprehensive | | | Accumulated | | | Total Stockholders’ Equity | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Income (loss) | | | Deficit | | | (Deficit) | |
Balance at December 31, 2020 | | | 1,000 | | | $ | 10,000,000 | | | | 6,233,326 | | | $ | 623 | | | $ | 122,248,037 | | | $ | - | | | $ | (132,275,047 | ) | | $ | (26,387 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (77,700 | ) | | | (77,700 | ) |
Balance at March 31, 2021 | | | 1,000 | | | | 10,000,000 | | | | 6,233,326 | | | | 623 | | | | 122,248,037 | | | | - | | | | (132,352,747 | ) | | | (104,087 | ) |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,826 | ) | | | - | | | | (5,826 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | (833,433 | ) | | | (833,433 | ) |
Balance at June 30, 2021 | | | 1,000 | | | | 10,000,000 | | | | 6,233,326 | | | | 623 | | | | 122,248,037 | | | | (5,826 | ) | | | (133,186,180 | ) | | | (943,346 | ) |
Preferred shares converted* | | | (1,000 | ) | | | (10,000,000 | ) | | | 71,683,250 | | | | 7,168 | | | | 9,992,832 | | | | - | | | | - | | | | - | |
Share issuance under acquisition of assets | | | - | | | | - | | | | 22,647,751 | | | | 2,265 | | | | 1,130,123 | | | | - | | | | - | | | | 1,132,388 | |
Share issuance under private placement | | | - | | | | - | | | | 130,281,102 | | | | 13,028 | | | | 3,511,972 | | | | - | | | | - | | | | 3,525,000 | |
Share issuance as financing costs | | | - | | | | - | | | | 5,661,938 | | | | 566 | | | | 282,531 | | | | - | | | | - | | | | 283,097 | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,263 | ) | | | - | | | | (2,263 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (656,430 | ) | | | (656,430 | ) |
Balance at September 30, 2021 | | | - | | | $ | - | | | | 236,507,367 | | | $ | 23,650 | | | $ | 137,165,495 | | | $ | (8,089 | ) | | $ | (133,842,610 | ) | | $ | (3,338,446 | ) |
*Upon a recapitalization and a reorganization of the Company from Oregon to Delaware effective August 9, 2021, the Preferred stock was eliminated with the Series A Convertible Preferred stock having prior converted to shares of common stock.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | For Nine Months Ended September 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Cash flows used in operating activities: | | | | | | |
Net loss | | $ | (2,249,753 | ) | | $ | (1,567,563 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation | | | 4,787 | | | | - | |
Non-cash operating lease expense | | | 970 | | | | - | |
Financing costs | | | 804,567 | | | | 283,096 | |
Stock based compensation | | | 441,071 | | | | - | |
Changes in certain assets and liabilities: | | | | | | | | |
Accounts receivable | | | (14,282 | ) | | | (9,622 | ) |
Prepaid costs and other assets | | | 33,359 | | | | (32,002 | ) |
Other current assets | | | - | | | | (40,690 | ) |
Accounts payable and other liability | | | 125,695 | | | | 422,316 | |
Net cash provided by (used in) operating activities | | | (853,586 | ) | | | (944,465 | ) |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Purchases of property and equipment | | | (17,641 | ) | | | - | |
Purchases of intangible asset | | | (1,052,395 | ) | | | (2,147,661 | ) |
Net cash (used in) investing activities | | | (1,070,036 | ) | | | (2,147,661 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Proceeds from private placement | | | - | | | | 3,525,000 | |
Proceeds from long term debt | | | 819,000 | | | | - | |
Proceeds from short term debt | | | 570,000 | | | | - | |
Net cash provided by financing activities | | | 1,389,000 | | | | 3,525,000 | |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | (534,622 | ) | | | 432,874 | |
Foreign Exchange Gain (loss) | | | (162,281 | ) | | | (8,088 | ) |
Cash and cash equivalents, beginning of year | | | 1,128,825 | | | | 24,788 | |
Cash and cash equivalents, end of year | | $ | 431,922 | | | $ | 449,574 | |
| | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | |
Cash received (paid) for income taxes, net | | $ | 114,861 | | | $ | - | |
Cash paid for interest | | $ | - | | | $ | - | |
| | | | | | | | |
Non-cash Investing and Financing Activities | | | | | | | | |
Capitalized stock-based compensation | | $ | 369,836 | | | $ | - | |
Short term debt to long term debt | | $ | 570,000 | | | $ | - | |
Accrued interest payable to long term debt | | $ | 20,221 | | | $ | - | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS
Historical Information:
The Company was incorporated in the State of Oregon on February 8, 1989, as Metro One Direct Information Services Inc. On December 12, 1995, we changed our name to Metro One Telecommunications Inc. The Company was formerly in the business of providing directory assistance service to subscribers through carrier contracts starting with its first contract in 1991. Previously the Company was contracted with a number of wireless carriers, voice over internet protocol providers, cable companies and various other carriers both free and prepaid providing live operator directory assistance services to the carriers’ subscribers and users. Revenues were historically derived principally through fees charged to telecommunications carriers.
Starting in 2005, the Company went through a number of restructures of its business in an attempt to retain market share in a rapidly evolving technology and telecommunications industry.
In March 2008, the Company decided to exit the wholesale directory assistance business, but to continue to pursue growth in the Company’s small data services business which it had concurrently developed.
As of September 2008, the Company had closed all of its call centers and approximately 700 employees were terminated. In conjunction with the closures, the Company sold a majority of its patent and trademarks to raise funds to continue operations.
Further, during 2008, the Company voluntarily deregistered its common stock under the Securities Exchange Act of 1934. With that action the Company moved from the OTC Markets Bulletin Board to the OTC Markets Pink Sheets.
The Company was unsuccessful in pursuing its then current business and ceased filing any current information reports with OTC Markets in fiscal 2009.
Current Information:
Certain of the officers and directors of the Company maintained the Company’s registration as an Oregon corporation while seeking other business opportunities for the Company and its stockholders between fiscal 2009 and August 9, 2021, when the Company redomiciled to Delaware.
On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to acquire assets of Royal App Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash, the assumption of $200,000 in repayable government grants, as well as 8% equity in the Company on a diluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition, the “Recapitalization”.
Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile enterprise software platform that helps retailers and fast-moving consumer goods companies become growth companies. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients. Concurrent with the acquisition of the Shelfy software assets, management determined the technological feasibility of proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering, initially integrated on key reseller platforms, with the intent of repositioning the software with an entirely new and much larger market base. An easy to use, fully customizable mobile commerce app for download by consumers across all industry segments for a base monthly subscription fee, and readily available add on features for additional monthly fees based on individual consumer selections.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
If the Recapitalization of the Company was not approved by the shareholders and the 8% of the Company Capitalization was not issued to the bankruptcy trustee within 120 days from the date of the closing of the Acquisition, or April 26, 2021, the trustee, who held a pledge over the assets of Royal App purchased by Stratford, had the right to foreclose on such assets.
Any foreclosure would result in the transfer of the ownership of Royal App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The transactions as contemplated above were successfully completed during the year ended December 31, 2021, and the Trustee released its pledge over the assets.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices. The terms of the SAFES required that they automatically convert into common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock. The Company undertook the conversion of preferred stock in the year ended December 31, 2021, upon receipt of shareholder approval of certain proposed corporate restructure plans.
After the conversion of the preferred stock, and as part of the agreement for the acquisition of the assets of Royal App the Company also agreed to issue common stock for commission fees of 2% of the Company’s common stock on a diluted basis, and to the employees of Stratford as to 8% of the Company on a diluted basis, under the terms of an Employee Stock Option Plan approved by Shareholders. Further, in order to undertake these issuances, the Company was required to increase the authorized common stock of the Company.
On June 9, 2021, the Company announced a Stockholders’ meeting to be held on June 30, 2021, to approve the following actions:
1. | An amendment to the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000; |
| |
2. | An amendment to the articles of the Company to effect a reverse stock split on the basis of not less than 1 for 10 and not more than 1 for 100. Such ratio to be determined by the Board of Directors of the Company; |
| |
3. | Approval of a 2021 Employee Stock Incentive Plan. The Plan will have available shares equity to 25% of the Company’s capitalization and a term of ten years from the effective date of the Plan; |
4. | Approval of the Company’s reorganization from Oregon to Delaware. |
The meeting was held on June 30, 2021, and the Company’s shareholders approved all the actions detailed above, as well as the conversion of 1,000 outstanding shares of Company’s Series A convertible preferred stock whereby each 1 share of Preferred stock held was convertible into 71,683.25 shares of common stock. As a result, during the year ended December 31, 2021, the holders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of SAFES was converted into a total of 126,614,436 shares of common stock at $0.02567 per share. On August 9, 2021, the Company redomiciled and filed articles of conversion moving its registration to the State of Delaware.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
During the year ended December 31, 2021, the Company undertook a second financing by way of Private Investment in Public Equity ("PIPE") in the form of unregistered Units at $0.075, each Unit consisting of a share of Common Stock and ½ share purchase warrant for exercise for a period of two years form the date of grant at $0.975 per share. The Company accepted subscriptions with respect to the sale of 25,080,000 for $1,881,000 in gross proceeds. Certain of the PIPE investments had agent fees payable at a rate of 4.25%.
On February 9, 2022, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission to offer up to 80,000,000 Units consisting of one share of common stock and a ¼ warrant at $0.12 per Unit, with the associated warrants having an exercise price of $0.15 per share for a period of one year. Further the Company is registering a total of 200,031,733 shares of common stock and 21,998,323 shares of common stock underlying warrant exercises for certain selling stockholders.
During the six-month period ended June 30, 2022, the Company entered into certain Short Term Promissory Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date. The Company has received a total of $470,000 in proceeds ($70,000 of which was from a company controlled by our President) with respect to the Notes as at June 30, 2022 and issued a total of 1,958,333 warrants. In June 2022, the Company received a further $100,000 in the form of a short-term promissory note from a company controlled by our President, with a term of four (4) months from issue date, bearing interest at a rate of 12% per annum.
During the three-month period ended September 30, 2022, the Company received a further $819,000 in cash proceeds from certain Note and Securities Purchase Agreements ( the “Notes”) and rolled over $570,000 of previously incurred debt under certain notes entered into during the first quarter, including accrued interest (the “New Notes”), with each of the Notes and New Notes having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 9,864,547 shares of common stock to the Noteholders in conjunction with the terms of the agreements during the nine months ended September 30, 2022. Concurrent with the New Notes a total of 291,667 warrants issued to a company controlled by our CEO in June 2022 were cancelled and a company controlled by our CEO received commissions in respect of the Notes totaling approximately $48,800.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has recently acquired operating assets, is generating modest revenues, and is in the process of pursuing expansion of its new business venture. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans for the continuation of the Company as a going concern include financing the Company’s operations through issuance of its common stock, conducting revenue generating operations or expanding the Company’s existing business operations to acquire projects which generate additional revenue. If the Company is unable to complete its financing requirements or achieve net profits as projected, it will then modify its expenditures and plan of operations to coincide with the actual financing completed and actual operating revenues, if any. The Company is currently seeking a further equity financing of up to $10 million US Dollars to meet ongoing capital requirements and has filed a registration statement on Form S-1 for this purpose on February 9, 2022. Further the Company entered into certain Short Term Promissory Notes and raised a total of $1,439,000 during the nine months ended September 30, 2022 (Note 7).
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 2 – GOING CONCERN (continued)
There are no assurances the Company will succeed in implementing its plans. Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
COVID-19
The ongoing COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may impact the Company’s ability to raise additional capital and to pursue certain planned operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is subject to change. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the ongoing effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or complete planned software implementations.
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES
Fiscal Year end
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (US GAAP). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature.
Basis of Consolidation
These condensed consolidated financial statements include the accounts of the Company and its 100% controlled Israeli subsidiary, Stratford Ltd (“Stratford”) as of September 30, 2022. All significant intercompany accounting transactions have been eliminated as a result of consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (continued)
Foreign Currency Translation (continued)
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses are included in “General and Administrative” on the Company’s consolidated statements of operations.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes foreign currency translation adjustments related to the Company’s subsidiary in Israel and is excluded from the accompanying consolidated statements of operations.
Property and Equipment
Property and equipment, including leasehold improvements, are recorded at cost net of accumulated depreciation. Maintenance and repairs are expensed as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:
Computer and telephone equipment | | 3 years |
Intangible Assets
The Company recognizes assets for customer relationships, developed technology, post-technological feasibility software development costs, patents and finite-lived trade names. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from 3 to 8 years. Amortization for developed technology is recognized in cost of revenue. Amortization for customer relationships and trade names is recognized in sales and marketing expenses.
In the year ended December 31, 2021, the Company recorded assets acquired in the cumulative amount of approximately $3.4 million (cash proceeds, share based consideration and the assumption of certain repayable grants issued by the government of Israel which financed certain development activities related to the intellectual property) purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. Intangible assets acquired included intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property and the future estimated value of certain customer relationships. We initially record acquired intangible assets at their estimated fair values and we review these assets periodically for impairment.
Software Research and Development Expenditures
Software development expenditures consist primarily of costs associated with the on-going modifications to certain software acquired from Royal App including employee compensation and certain stock based compensation associated with certain employee contracts, as well as other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development incurred pre-technological feasibility are expensed as incurred. Post-technological feasibility expenditures are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.4 million purchased through a liquidation
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (continued)
Software Research and Development Expenditures (continued)
proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. During the year ended December 31, 2021, we capitalized approximately $990,000 in ongoing development expenditures incurred post-technological feasibility, and $28,483 in patent related expenditures.
During the nine months ended September 30, 2022, we capitalized an additional $1,422,000 in ongoing development expenditures as we continued to complete the programming required for the transfer of iOS and Android operating systems to Flutter, and integrate our SaaS product with the major online retailing platforms Shopify and WooCommerce.
Impairment
We account for indefinite-lived intangible assets using the accounting guidance in ASC 350-30-35. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result, the Company presently has the option to bypass the qualitative assessment and perform the quantitative assessment.
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:
| ● | Level 1: Observable inputs such as quoted prices in active markets; |
| ● | Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and; |
| ● | Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions |
The Company’s financial instruments include cash, accounts payable, related party loans and short term promissory notes. The carrying amounts of cash and accounts payable approximate their fair value, due to the short-term nature of these items.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (continued)
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
· | Identification of the contract, or contracts, with a customer; |
· | Identification of the performance obligations in the contract; |
· | Determination of the transaction price; |
· | Allocation of the transaction price to the performance obligations in the contract; and |
· | Recognition of revenues when, or as, the Company satisfies a performance obligation |
Subscription Revenues
Subscription revenues primarily consist of monthly fees for providing customers access to our software offerings including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is very different than the next with prices increasing as the functionality increases.
Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.
Customized Service Revenues
Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the services are performed.
Stock-Based Compensation
We account for stock options granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (continued)
Stock-Based Compensation (continued)
Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur.
For the three and nine months ended September 30, 2022 and 2021, stock-based compensation and other equity instrument related expenses and expenditures recognized in the consolidated statements of operations is as follows:
Stock-Based Compensation (continued)
| | Three months ended September 30, | | | Nine months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Capitalized as software research and development expenditure | | $ | 104,580 | | | $ | - | | | $ | 369,836 | | | $ | - | |
Sales and marketing | | | 1,165 | | | | - | | | | 5,132 | | | | - | |
General and administrative expenses | | | 50,952 | | | | - | | | | 435,939 | | | | - | |
Total stock-based compensation expense | | $ | 156,697 | | | $ | - | | | $ | 810,907 | | | $ | - | |
Leases
The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than twelvemonths are included in Operating lease right-of-use assets and Operating lease liabilities in the Consolidated Balance Sheets.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for non-lease components separately from the lease component.
Income Taxes
Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Basic and Diluted Net Income (Loss) Per Share
In accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (continued)
Basic and Diluted Net Income (Loss) Per Share (continued)
Potential common stock consists of the incremental common stock issuable upon convertible notes, stock options and warrants and classes of shares with conversion features. The computation of basic loss per share for the three and nine months ended September 30, 2022 and 2021 excludes potentially dilutive securities because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted losses per share. The Company had a total of 29,458,973 potentially dilutive securities outstanding at September 30, 2022 in relation to vested and exercisable stock options and exercisable share purchase warrants.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 4 – ACQUISITION OF ASSETS
During March 2021 the Company entered into an agreement, (the “Agreement”,) for the purchase of certain assets of Royal App Ltd., a corporation incorporated in Israel, through a liquidation proceeding approved by the Lod District Court (Israel) within the framework of Insolvency Case 53873-01-21. On April 26, 2021, the Company completed a cash payment to the trustee for the acquisition of the identified assets, and the assets were effectively transferred to the Company’s controlled subsidiary, Stratford Ltd. The acquired assets consist primarily of intellectual property which forms the basis of a re-developed SaaS software offering upon completion of development and launch by the Company. At the time of the acquisition of the aforementioned assets, the Company had determined the technological feasibility of the proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering integrated on key reseller platforms.
Assets acquired included intellectual property in the form of a series of customized enterprise software applications, associated patents and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property. The Company also agreed to assume two customer service agreements using the original “Shelfy” enterprise software application, with limited remaining life spans. Finally, the Company acquired certain equipment and fixed assets which had been fully depreciated at the time of acquisition. Liabilities acquired included certain repayable government grants.
In consideration for the assets acquired the Company paid $2,140,288 (net of VAT), assumed approximately $200,000 USD in repayable government grants, which grants are repayable at a rate of 3% of gross sales until retired in full, and agreed to issue 8% of the Company’s issued and outstanding shares on a diluted basis, following the issuance of certain share capital in respect to the sale of common shares under SAFES, the conversion of 1,000 shares of Series A preferred stock to common stock and an estimate of shares expected to be issued for certain warrants and employee stock options during fiscal 2021. The consideration shares were to be issued to the bankruptcy trustee within 120 days from the date of the closing of the acquisition, April 26, 2021. The trustee, who holds a pledge over the assets of Royal App purchased by Stratford Ltd., may foreclose on such assets in the event the consideration shares were not issued as required under the terms of the Agreement. Any foreclosure would result in the transfer of the ownership of Royal App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The 22,647,751 consideration shares were issued to the trustee in August 2021 and were valued at the fair market value on the date of issue or $967,853 (net of VAT), as part of the acquisition consideration.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 4 – ACQUISITION OF ASSETS (continued)
The Company has recorded the acquired assets on the Company’s balance sheets as Intangible Assets at fair market value of cash paid and shares issued as of the date of acquisition. Customer relationships were recorded at the fair value of remaining contract terms. Intangible assets acquired were allocated as follows:
Enterprise software applications including associated patents, trademarks and rights | | $ | 3,168,228 | |
Customer relationships | | | 235,000 | |
Total intangible assets | | $ | 3,403,228 | |
The Company has determined there is no impairment to the acquired assets or improvements at the nine months ended September 30, 2022 or the year ended December 31, 2021, as the development of the modified software suite for SAAS applications is ongoing with commercial launch expected in prior to September 30, 2022.
The Company also paid a transaction fee of 2% of the diluted share capital by way of the issuance of 5,661,938 common shares to Everest Corporate Finance Ltd., a company of which our President is an officer, director and shareholder. The shares were valued at fair market value or $283,096 which amount was expensed as a finance cost.
NOTE 5 – INTANGIBLE ASSETS
The following table provides additional information regarding the intangible assets acquired:
| | September 30, 2022 | | | December 31, 2021 | |
Purchased assets – Royal App (Note 5) | | $ | 3,403,228 | | | $ | 3,403,228 | |
Capitalized patent application costs | | | 28,483 | | | | 28,483 | |
Capitalized software development expenditures | | | 2,412,872 | | | | 990,641 | |
Total intangible assets | | $ | 5,844,583 | | | $ | 4,422,352 | |
During the quarter ended September 30, 2022 the Company completed the upgraded SaaS software application which has been launched commercially for download on each of Shopify and WooCommerce.
NOTE 6 – PRIVATE PLACEMENT
Simple Agreements for Future Equity (“SAFES”)
Investor deposits consist of $3,250,000 of gross proceeds received in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices during the period ended June 30, 2021. The terms of the SAFES required that they automatically convert into restricted, unregistered shares of common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock at such price per share equal to the fully diluted capital post conversion of the preferred stock divided by $2,000,000, or $0.02567 per share. On August 20, 2021, 126,614,436 unregistered restricted shares of common stock were issued in exchange for 3.25M in proceeds from SAFES.
Private Investment in Public Equity (“PIPE”)
During the year ended December 31, 2021, the Company received gross proceeds of $1,881,000 from accredited investors in the form of PIPES and completed the sale of 25,080,000 units at a price of $0.075 per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each warrant is exercisable into one share of common stock at a price of $0.0975 expiring in two years from the date of issuance.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 7 – DEBT
During the three months ended March 31, 2022, the Company received a total of $400,000 in proceeds from Short Term Promissory Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder shall receive a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date.
In June 2022 the Company accepted a further $70,000 in proceeds in the form of Short-Term Promissory Notes from a company controlled by our President, having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash. The Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date.
The Company issued a total of 1,958,333 share purchase warrants in respect to the aforementioned Notes. The Company valued these warrants using the Black Scholes model utilizing volatility ranging from 303.60% to 419.67%, and a risk-free rate of from 1.35% to 2.88%. The fair value of the warrants was $165,602, which amount was recorded as financing costs.
In June 2022, the Company received $100,000 in the form of a short-term promissory note from a company controlled by our President, with a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash.
During three month period ended September 30, 2022, the Company received a total of $869,000 in cash proceeds from certain Note and Securities Purchase Agreements ( the “Notes”) and rolled over $570,000 of previously incurred debt under certain notes entered into during the first quarter, including accrued interest (the “New Notes”), with each of the Notes and New Notes having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 9,864,547 shares of common stock as loan bonuses to the Noteholders in conjunction with the terms of the agreements during the nine months ended September 30, 2022. The Company issued a total of 1,958,333 share purchase warrants in respect to the aforementioned Notes. The fair value of the shares was $637,979, which amount was recorded as financing costs.
Concurrent with the New Notes a total of 291,667 warrants issued to a company controlled by our CEO in June 2022 were cancelled and a company controlled by our CEO received commissions in respect of the New Notes totaling approximately $48,800.
The following table provides additional information regarding the financing cost:
| | Three months ended September 30, | | | Nine months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Interest expense on Notes | | $ | 17,600 | | | $ | - | | | $ | 33,289 | | | $ | - | |
Commissions paid | | | 63,302 | | | | 9,916 | | | | 63,302 | | | | 92,759 | |
Warrants issued, fair value | | | - | | | | - | | | | 165,602 | | | | - | |
Stock issued | | | 638,965 | | | | | | | | 638,965 | | | | 283,097 | |
Total | | $ | 719,867 | | | $ | 9,916 | | | $ | 901,158 | | | $ | 375,856 | |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 7 – DEBT (continued)
The following table provides additional information regarding accrued interest payable with respect to the aforementioned notes, included in accounts payable:
| | September 30, 2022 | | | December 31, 2021 | |
Interest payable under Notes | | $ | 11,254 | | | $ | - | |
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
Common Stock and Preferred Stock
Up to August 9, 2021, Company had authorized 50,000,000 shares of Common stock, no par value and 10,000,000 shares of Preferred stock, no par value, of which 1,385 shares have been designated Series A convertible preferred stock with a liquidation preference of $10,000 per share. Holders of convertible preferred stock, when voting with the holders of our common stock, are entitled to an approximate 0.856 vote for each share of common stock into which the Series A convertible preferred stock registered in the shareholder’s name can be converted. Each share of Series A convertible preferred Stock is convertible into approximately 71,683.25 shares of common stock. In addition, the holders of the convertible preferred stock were entitled to elect a majority of the members of our Board of Directors. On August 9, 2021, the Company filed articles of conversion moving its registration to the State of Delaware and amending the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000, $0.0001 par value, and eliminating the Preferred stock.
During the year ended December 31, 2021, the Company issued the following shares of common stock:
- | 71,683,250 shares of unregistered restricted common stock upon conversion of 1,000 shares of the Series A convertible Preferred stock to its controlling shareholder, Everest Credit L.P., a company of which our President and Director is a beneficial owner; |
| |
- | 5,661,938 shares of unregistered restricted common stock to Everest Corporate Finance Ltd., a company of which our President and Director is a beneficial owner, as commission fees in respect to the acquisition of the assets of Royal App Ltd; |
- | 22,647,751 shares of unregistered restricted common stock to the Trustee in Liquidation for Royal App as part of the agreed consideration under the acquisition agreement; |
- | 126,614,436 unregistered restricted shares of common stock in exchange for 3.25M in proceeds from SAFES from various accredited investors. |
| |
- | 25,080,000 units at $0.075 each for gross proceeds of $1,881,000 in the form of PIPES. Each unit consists of one common share and one-half of one share purchase warrant. Each warrant will entitle the holder to purchase one common share for $0.0975 expired in two years. The Company paid agent commissions on $1.376 M in proceeds at 4.25% for a total of $58,480 in financing costs. The Company granted 7,791,658 Stock Purchase Warrants to one of its financing agents, exercisable for a period of two years from the date of grant at $0.02567 per share. The Company recorded $854,632 in financing costs. |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
During the nine months ended September 30, 2022, the Company issued the following shares of common stock:
- | a total of 9,864,547 shares of common stock as loan bonus to the Noteholders in conjunction with the terms of certain loan agreements. (Ref: Note 7 – Debt) |
On September 30, 2022, and December 31, 2021, the Company had 267,785,247 and 257,920,700 shares of common stock issued and outstanding, respectively.
Stock Purchase Warrants
During the nine months ended September 30, 2022, Company issued a total of 1,958,333 stock purchase warrants in respect to certain notes for a period of One (1) year from grant date with an exercise price of $0.12 per share. The fair value of the warrants was $165,602, which amount was recorded as financing costs. Concurrent with the New Notes a total of 291,667 warrants issued to a company controlled by our CEO in June 2022 were cancelled.
Warrant transactions are summarized as follows:
| | Number of Warrants | | | Weighted Average Exercise Price ($) | |
Balance, December 31, 2020 | | | - | | | $ | - | |
Warrants issued | | | 20,331,658 | | | | 0.07 | |
Warrants expired | | | - | | | | - | |
Balance, December 31, 2021 | | | 20,331,658 | | | | 0.07 | |
Warrants issued | | | 1,958,333 | | | | 0.12 | |
Warrants cancelled | | | (291,667 | ) | | | 0.12 | |
Warrants expired | | | - | | | | - | |
Balance, September 30, 2022 | | | 21,998,324 | | | $ | 0.074 | |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
The following warrants were outstanding as at September 30, 2022:
Number of Warrants | | | Exercise Price ($) | | | Expiry Date | |
| 1,333,333 | | | | 0.0975 | | | September 09, 2023 | |
| 500,000 | | | | 0.0975 | | | September 27, 2023 | |
| 7,791,658 | | | | 0.02567 | | | October 1, 2023 | |
| 333,333 | | | | 0.0975 | | | October 18, 2023 | |
| 5,666,667 | | | | 0.0975 | | | October 19, 2023 | |
| 1,000,000 | | | | 0.0975 | | | October 21, 2023 | |
| 240,000 | | | | 0.0975 | | | October 24, 2023 | |
| 666,667 | | | | 0.0975 | | | October 26, 2023 | |
| 666,667 | | | | 0.0975 | | | October 28, 2023 | |
| 600,000 | | | | 0.0975 | | | October 29, 2023 | |
| 800,000 | | | | 0.0975 | | | November 01, 2023 | |
| 533,333 | | | | 0.0975 | | | November 02, 2023 | |
| 200,000 | | | | 0.0975 | | | November 19, 2023 | |
| 208,333 | | | | 0.12 | | | March 16, 2023 | |
| 625,000 | | | | 0.12 | | | March 22, 2023 | |
| 833,333 | | | | 0.12 | | | March 27, 2023 | |
| 21,998,324 | | | | | | | | |
Stock Options
The Company granted the following Stock options under its 2021 Employee Stock Incentive Plan:
- | 9,000,000 fully vested incentive stock options to directors, officers and consultants of the Company for exercise at $0.0257 for a term of 4 years from grant |
| |
- | 7,077,422 qualified employee stock options to certain officers, directors and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.123 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of October 26, 2021. |
- | 11,465,424 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.02567 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of May 2, 2021. |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
Stock Options (continued)
- | 1,500,414 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.103 per share for a period of five years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with vesting commencement dates between November 2021 and June 2022. |
| |
- | 1,833,334 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.0781 per share for a period of five years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with vesting commencement dates August 2022. |
| |
- | 6,829,712 options were forfeit upon termination of certain employment agreements. |
Additional information with respect to the stock option activity is as follows:
| | Number of Shares | | | Weighted Average Exercise Price | | | Weighted Average Remaining Term in Years | | | Aggregate Intrinsic Value | |
Outstanding at December 31, 2021 | | | 27,542,845 | | | $ | 0.05068 | | | | 3.60 | | | $ | - | |
Granted | | | 3,333,748 | | | | 0.089 | | | | 5 | | | | - | |
Exercised | | | - | | | | - | | | | - | | | | - | |
Cancelled | | | (6,829,712 | ) | | | 0.119 | | | | - | | | | - | |
Outstanding at September 30, 2022 | | | 24,046,881 | | | $ | 0.0574 | | | | 3.07 | | | $ | - | |
| | | | | | | | | | | | | | | | |
Options exercisable at September 30, 2022 | | | 7,460,649 | | | $ | 0.02567 | | | | 2.81 | | | $ | - | |
| | Number of Shares | | | Weighted Average Exercise Price | | | Weighted Average Remaining Term in Years | | | Aggregate Intrinsic Value | |
Outstanding at December 31, 2020 | | | - | | | $ | - | | | | - | | | $ | - | |
Granted in 2021 | | | 27,542,845 | | | $ | 0.0507 | | | | - | | | | - | |
Exercised in 2021 | | | - | | | $ | - | | | | - | | | | - | |
Cancelled in 2021 | | | - | | | $ | - | | | | - | | | | - | |
Outstanding at December 31, 2021 | | | 27,542,845 | | | $ | 0.05068 | | | | 3.60 | | | $ | - | |
| | | | | | | | | | | | | | | | |
Options exercisable at December 31, 2021 | | | 9,000,000 | | | $ | 0.02567 | | | | 3.75 | | | $ | - | |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
Stock Options (continued)
The following table summarizes information about stock options outstanding and exercisable at September 30, 2022:
Range of Exercise Prices | | | Number of Shares Outstanding | | | Weighted Average Remaining in Contractual Life in Years | | | Outstanding Options Weighted Average Exercise Price | | | Number of Options Exercisable | | | Exercisable Options Weighted Average Exercise Price | |
| $0.02567 | | | | 3,904,256 | | | | 3.00 | | | $ | 0.02567 | | | | 3,904,256 | | | $ | 0.02567 | |
| $0.02567 | | | | 11,146,939 | | | | 2.59 | | | $ | 0.02567 | | | | 3,556,393 | | | $ | 0.02567 | |
| $0.12300 | | | | 5,661,938 | | | | 3.07 | | | $ | 0.12300 | | | | - | | | $ | - | |
| $0.10300 | | | | 1,500,414 | | | | 4.70 | | | $ | 0.10300 | | | | - | | | $ | - | |
| $0.0781 | | | | 1,833,334 | | | | 4.84 | | | | | | | | | | | | | |
$0.02567 ~ $0.12300 | | | | 24,046,881 | | | | 3.07 | | | $ | 0.0498 | | | | 7,460,649 | | | $ | 0.02567 | |
Unamortized compensation expense associated with unvested options is $969,821 and $1,821,701as of September 30, 2022 and December 31, 2021, respectively. The weighted average period over which these costs are expected to be recognized is approximately 3.18 years.
NOTE 9 – COMMITMENTS
Leases
In March 2022, we leased car in Israel with a lease term of 36 months expiring in July 2024.
We used a discount rate of 6.75% in determining our operating lease liabilities, which represented our incremental borrowing rate. Short-term leases with initial terms of twelve months or less are not capitalized.
We determine if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain lease agreements contain extension options; however, we have not included such options as part of right-of-use assets and lease liabilities because we originally did not expect to extend the leases. We measure and record a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, we measure the right-of-use assets and lease liabilities using a discount rate equal to our estimated incremental borrowing rate for loans with similar collateral and duration.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 9 – COMMITMENTS (continued)
Leases (cont’d)
Operating lease expense is comprised of the following:
| | Three months ended September 30, | | | Nine months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Operating lease cost | | $ | 3,389 | | | $ | - | | | $ | 10,439 | | | $ | - | |
Maturities of lease liabilities are as follows:
| | Operating Leases | |
2022 | | $ | 3,230 | |
2023 | | | 12,924 | |
2024 | | | 7,538 | |
Total lease payments | | | 23,692 | |
Less imputed interest | | | (1,465 | ) |
Total lease liabilities | | | 22,227 | |
Less current portion of lease liabilities | | | (11,783 | ) |
Long-term lease liabilities | | $ | 10,444 | |
NOTE 10 – RELATED PARTY TRANSACTIONS
Key management compensation
Key management personnel are persons responsible for planning, directing, and controlling the activities of the entity, and include all directors and officers.
| | Three months ended September 30, | | | Nine months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Management fees | | $ | 80,357 | | | $ | 142,267 | | | $ | 336,905 | | | $ | 223,708 | |
At September 30, 2022, accounts payable and accrued liabilities included $0 ($22,139 – December 31, 2021) of management fees with respect to key management compensation.
Effective April 1, 2022, Ms. Bianca Meger, the Company’s CEO, transitioned to focus a larger portion of her efforts on the day-to-day operations of Metro One and as a result, resigned from her position as Co-CEO of Stratford Ltd.
On July 19, 2022, the Company accepted the resignation of Ms. Bianca Meger as the Company’s Chief Executive Officer and Mr. Elchanan Maoz was appointed to serve as Interim Chief Executive Officer.
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Nine Months Ended September 30, 2022 and 2021
NOTE 11 – SUBSEQUENT EVENTS
On October 5, 2022 the Company received cash proceeds of $50,000 from a Note and Securities Purchase Agreement having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 350,000 shares of common stock as a loan bonus to the Noteholder in conjunction with the terms of the agreement.
The Company has evaluated events for the period from September 30, 2022, through the date of the issuance of these financial statements, November 14, 2022, and determined that there are no additional events requiring disclosure.
Metro One Telecommunications, Inc.
FINANCIAL STATEMENTS
Years ended December 31, 2021 and 2020
With Report of Independent Registered Public Accounting Firm
TABLE OF CONTENTS
| | Gries & Associates, LLC Certified Public Accountants 501 S. Cherry Street Suite 1100 Denver, Colorado 80246 |
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Metro One Telecommunications, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Metro One Telecommunications, Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, statements of stockholders’ deficit, and cash flows for each of the two years then ended, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the financial statements, the Company has incurred losses since inception of $136,809,383. These factors create an uncertainty as to the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Emphasis of Matters-Risks and Uncertainties
The Company is not able to predict the ultimate impact that COVID -19 will have on its business. However, if the current economic conditions continue, the pandemic could have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company plans to operate.
/s/ Gries & Associates, LLC |
|
We have served as the Company’s auditor since 2022. |
| |
Denver, CO September 1, 2022 |
blaze@griesandassociates.com
501 S. Cherry Street Suite 1100, Denver, Colorado 80246
(O)720-464-2875 (M)773-255-5631 (F)720-222-5846
Metro One Telecommunications, Inc.
Consolidated Balance Sheets
| | December 31, 2021 | | | December 31, 2020 | |
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 1,128,825 | | | $ | 24,788 | |
Accounts receivable | | | 18,865 | | | | - | |
Prepaid expenses | | | 180,808 | | | | - | |
Other current assets | | | 230,270 | | | | - | |
Total current assets | | | 1,558,768 | | | | 24,788 | |
| | | | | | | | |
Property and equipment. net | | | 7,244 | | | | - | |
Intangible assets | | | 4,422,352 | | | | - | |
Operating lease right-of-use assets | | | 34,432 | | | | - | |
Other assets | | | 21,911 | | | | - | |
Total assets | | $ | 6,044,707 | | | $ | 24,788 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity (Deficit) | | | | | | | | |
| | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 569,320 | | | $ | 51,175 | |
Current portion of operating lease liabilities | | | 12,835 | | | | - | |
Total current liabilities | | | 582,155 | | | | 51,175 | |
| | | | | | | | |
Other liability | | | 194,898 | | | | - | |
Operating lease liabilities | | | 22,173 | | | | | |
Total liabilities | | | 799,226 | | | | 51,175 | |
| | | | | | | | |
Stockholders’ equity (deficit) | | | | | | | | |
Preferred stock, no par value, 10,000,000 shares authorized: | | | | | | | | |
Series A convertible preferred stock, 1,385 shares authorized 0 and 1,000 shares issued and outstanding: liquidation preference of $0 and $10,000 per share, respectively* | | | - | | | | 10,000,000 | |
Common stock, $0.0001 par value; 600,000,000 shares authorized 257,920,700 and 6,233,326 shares issued and outstanding, at December 31, 2021 and 2020 respectively | | | 25,792 | | | | 623 | |
Additional paid in capital | | | 140,858,794 | | | | 122,248,037 | |
Accumulated deficit | | | (135,617,027 | ) | | | (132,275,047 | ) |
Other comprehensive income | | | (22,078 | ) | | | - | |
Stockholders’ equity (deficit) | | | 5,245,481 | | | | (26,387 | ) |
Total liabilities, redeemable preferred stock and Stockholders’ Deficit | | $ | 6,044,707 | | | $ | 24,788 | |
*Upon a recapitalization and a reorganization of the Company from Oregon to Delaware effective August 9, 2021, the Preferred stock was eliminated with the Series A Convertible Preferred stock having prior converted to shares of common stock.
The accompanying notes are an integral part of these audited consolidated financial statements.
Metro One Telecommunications, Inc.
Consolidated Statements of Operations
and Other Comprehensive Income
| | Years Ended December 31, | |
| | 2021 | | | 2020 | |
| | | | | | |
Revenues | | $ | 170,622 | | | $ | - | |
| | | | | | | | |
Operating expenses | | | | | | | | |
General and administrative | | $ | 1,718,058 | | | $ | 5,236 | |
Management Fees | | | 294,101 | | | | 48,000 | |
Sales and Marketing | | | 205,467 | | | | - | |
Finance Costs | | | 1,294,976 | | | | - | |
Total operating expenses | | | 3,512,602 | | | | 53,236 | |
| | | | | | | | |
Loss | | $ | (3,341,980 | ) | | $ | (53,236 | ) |
| | | | | | | | |
Basic and diluted net loss per common share | | $ | (0.04 | ) | | $ | (0.00 | ) |
| | | | | | | | |
Weighted average shares – basic and diluted | | | 94,175,874 | | | | 6,233,326 | |
| | | | | | | | |
Other Comprehensive Income (loss) | | | | | | | | |
Net Loss | | $ | (3,341,980 | ) | | $ | (49,512 | ) |
Foreign currency translation adjustment | | | (22,078 | ) | | | - | |
| | $ | (3,364,058 | ) | | $ | (49,512 | ) |
The accompanying notes are an integral part of these audited consolidated financial statements.
Metro One Telecommunications, Inc.
Consolidated Statements of Stockholders’ Equity (Deficit)
| | Preferred Shares | | | Common Stock | | | Additional Paid-in | | | Accumulated Other Comprehensive | | | Accumulated | | | Total Stockholders’ Equity | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Income (loss) | | | Deficit | | | (Deficit) | |
Balance at December 31, 2019 | | | 1,000 | | | $ | 10,000,000 | | | | 6,233,326 | | | $ | 623 | | | $ | 122,248,037 | | | $ | - | | | $ | (132,221,811 | ) | | $ | 26,849 | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (53,236 | ) | | | (53,236 | ) |
Balance at December 31, 2020 | | | 1,000 | | | | 10,000,000 | | | | 6,233,326 | | | | 623 | | | | 122,248,037 | | | | - | | | | (132,275,047 | ) | | | (26,387 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Preferred shares converted* | | | (1,000 | ) | | | (10,000,000 | ) | | | 71,683,250 | | | | 7,168 | | | | 9,992,832 | | | | - | | | | - | | | | - | |
Share issuance under acquisition of assets | | | - | | | | - | | | | 22,647,751 | | | | 2,265 | | | | 1,130,123 | | | | - | | | | - | | | | 1,132,388 | |
Share issuance under private placement | | | - | | | | - | | | | 151,694,435 | | | | 15,170 | | | | 5,115,830 | | | | - | | | | - | | | | 5,131,000 | |
Share issuance as financing costs | | | - | | | | - | | | | 5,661,938 | | | | 566 | | | | 282,530 | | | | - | | | | - | | | | 283,096 | |
Stock warrants granted as financing costs | | | - | | | | - | | | | - | | | | - | | | | 854,632 | | | | - | | | | - | | | | 854,632 | |
Stock based compensation | | | - | | | | - | | | | - | | | | - | | | | 1,144,077 | | | | - | | | | - | | | | 1,144,077 | |
Capitalized stock-based compensation | | | - | | | | - | | | | - | | | | - | | | | 90,733 | | | | - | | | | - | | | | 90,733 | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | (22,078 | ) | | | - | | | | (22,078 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,341,980 | ) | | | (3,341,980 | ) |
Balance at December 31, 2021 | | | - | | | $ | - | | | | 257,920,700 | | | $ | 25,792 | | | $ | 140,858,794 | | | $ | (22,078 | ) | | $ | (133,842,610 | ) | | $ | 5,245,481 | |
*Upon a recapitalization and a reorganization of the Company from Oregon to Delaware effective August 9, 2021, the Preferred stock was eliminated with the Series A Convertible Preferred stock having prior converted to shares of common stock.
The accompanying notes are an integral part of these audited consolidated financial statements.
Metro One Telecommunications, Inc.
Consolidated Statements of Cash Flows
| | Years Ended December 31, | |
| | 2021 | | | 2020 | |
| | | | | | |
Cash flows used in operating activities: | | | | | | |
Net loss | | $ | (3,341,980 | ) | | $ | (53,236 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation | | | 328 | | | | | |
Non-cash operating lease expense | | | 556 | | | | | |
Financing costs | | | 1,137,728 | | | | - | |
Stock based compensation | | | 1,144,077 | | | | | |
Changes in certain assets and liabilities: | | | | | | | | |
Accounts receivable | | | (18,238 | ) | | | - | |
Prepaid costs and other assets | | | (229,982 | ) | | | 27,000 | |
Accounts payable and other liability | | | 502,109 | | | | 49,197 | |
Net cash provided by (used in) operating activities | | | (805,402 | ) | | | 22,961 | |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Purchases of property and equipment | | | (7,331 | ) | | | - | |
Purchases of intangible asset | | | (3,409,906 | ) | | | - | |
Net cash (used in) investing activities | | | (3,417,237 | ) | | | - | |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Proceeds from private placements | | | 5,131,000 | | | | - | |
Net cash provided by financing activities | | | 5,131,000 | | | | - | |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | 908,361 | | | | 22,961 | |
Foreign Exchange Gain (loss) | | | 195,676 | | | | - | |
Cash and cash equivalents, beginning of year | | | 24,788 | | | | 1,827 | |
Cash and cash equivalents, end of year | | $ | 1,128,825 | | | $ | 24,788 | |
| | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | |
Cash received (paid) for income taxes, net | | $ | - | | | $ | - | |
Cash paid for interest | | $ | - | | | $ | - | |
| | | | | | | | |
Non-cash Investing and Financing Activities | | | | | | | | |
Royal App assets acquired by issuance of shares | | $ | 967,853 | | | $ | - | |
Other current assets acquired by issuance of shares | | $ | 164,535 | | | $ | - | |
Royal App assets acquired through assumption of repayable government grant | | $ | 193,920 | | | $ | - | |
The accompanying notes are an integral part of these audited consolidated financial statements.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 1 - NATURE OF OPERATIONS
Historical Information:
The Company was incorporated in the State of Oregon on February 8, 1989, as Metro One Direct Information Services Inc. On December 12, 1995, we changed our name to Metro One Telecommunications Inc. The Company was formerly in the business of providing directory assistance service to subscribers through carrier contracts starting with its first contract in 1991. Previously the Company was contracted with a number of wireless carriers, voice over internet protocol providers, cable companies and various other carriers both free and prepaid providing live operator directory assistance services to the carriers’ subscribers and users. Revenues were historically derived principally through fees charged to telecommunications carriers.
Starting in 2005, the Company went through a number of restructures of its business in an attempt to retain market share in a rapidly evolving technology and telecommunications industry.
In March 2008, the Company decided to exit the wholesale directory assistance business, but to continue to pursue growth in the Company’s small data services business which it had concurrently developed.
As of September 2008, the Company had closed all of its call centers and approximately 700 employees were terminated.
In conjunction with the closures, the Company sold a majority of its patent and trademarks to raise funds to continue operations.
Further, during 2008, the Company voluntarily deregistered its common stock under the Securities Exchange Act of 1934. With that action the Company moved from the OTC Markets Bulletin Board to the OTC Markets Pink Sheets.
The Company was unsuccessful in pursuing its then current business and ceased filing any current information reports with OTC Markets in fiscal 2009.
Current Information:
Certain of the officers and directors of the Company maintained the Company’s registration as an Oregon corporation while seeking other business opportunities for the Company and its stockholders between fiscal 2009 and current date.
On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to acquire assets of Royal App Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash, the assumption of $200,000 in repayable government grants, as well as 8% equity in the Company on a diluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition, the “Recapitalization”.
Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile enterprise software platform that helps retailers and fast moving consumer goods companies become growth companies. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients. Concurrent with the acquisition of the Shelfy software assets, management determined the technological feasibility of proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering, initially integrated on key reseller platforms, with the intent of repositioning the software with an entirely new and much larger market base. An easy to use, fully customizable mobile commerce app for download by consumers across all industry segments for a base monthly subscription fee, and readily available add on features for additional monthly fees based on individual consumer selections.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
If the Recapitalization of the Company was not approved by the shareholders and the 8% of the Company Capitalization was not issued to the bankruptcy trustee within 120 days from the date of the closing of the Acquisition, or April 26, 2021, the trustee, who holds a pledge over the assets of Royal App purchased by Stratford, had the right to foreclose on such assets. Any foreclosure would result in the transfer of the ownership of Royal App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The transactions as contemplated above were successfully completed during the year ended December 31, 2021, and the Trustee released its pledge over the assets.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices. The terms of the SAFES required that they automatically convert into common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock. The Company undertook the conversion of preferred stock in the year ended December 31, 2021, upon receipt of shareholder approval of certain proposed corporate restructure plans.
After the conversion of the preferred stock, and as part of the agreement for the acquisition of the assets of Royal App the Company also agreed to issue common stock for commission fees of 2% of the Company’s common stock on a diluted basis, and to the employees of Stratford as to 8% of the Company on a diluted basis, under the terms of an Employee Stock Option Plan approved by Shareholders. Further, in order to undertake these issuances, the Company was required to increase the authorized common stock of the Company.
On June 9, 2021, the Company announced a Stockholders’ meeting to be held on June 30, 2021, to approve the following actions:
1. | An amendment to the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000; |
2. | An amendment to the articles of the Company to effect a reverse stock split on the basis of not less than 1 for 10 and not more than 1 for 100. Such ratio to be determined by the Board of Directors of the Company; |
3. | Approval of a 2021 Employee Stock Incentive Plan. The Plan will have available shares equity to 25% of the Company’s capitalization and a term of ten years from the effective date of the Plan; |
4. | Approval of the Company’s reorganization from Oregon to Delaware. |
The meeting was held on June 30, 2021, and the Company’s shareholders approved all the actions detailed above, as well as the conversion of 1,000 outstanding shares of Company’s Series A convertible preferred stock whereby each 1 share of Preferred stock held was convertible into 71,683.25 shares of common stock. As a result, during the year ended December 31, 2021, the holders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of SAFES was converted into a total of 126,614,436 shares of common stock at $0.02567 per share. On August 9, 2021, the Company redomiciled and filed articles of conversion moving its registration to the State of Delaware.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
During the year ended December 31, 2021, the Company undertook a second financing by way of Private Investment in Public Equity (“PIPE”) in the form of unregistered Units at $0.075, each Unit consisting of a share of Common Stock and ½ share purchase warrant for exercise for a period of two years form the date of grant at $0.975 per share. The Company accepted subscriptions with respect to the sale of 25,080,000 common shares for $1,881,000 in gross proceeds. Certain of the PIPE investments have agent fees payable at a rate of 4.25%.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has recently acquired operating assets, is generating modest revenues, and is in the process of pursuing expansion of its new business venture. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans for the continuation of the Company as a going concern include financing the Company’s operations through issuance of its common stock, conducting revenue generating operations or expanding the Company’s existing business operations to acquire projects which generate additional revenue. If the Company is unable to complete its financing requirements or achieve net profits as projected, it will then modify its expenditures and plan of operations to coincide with the actual financing completed and actual operating revenues, if any. The Company is currently seeking a further equity financing of up to $10 million US Dollars to meet ongoing capital requirements and has filed a registration statement on Form S-1 for this purpose, subsequent to the year ended December 31, 2021.
There are no assurances the Company will succeed in implementing its plans. Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
COVID-19
The ongoing COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may impact the Company’s ability to raise additional capital and to pursue certain planned operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is subject to change. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the ongoing effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or complete planned software implementations.
NOTE 3 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES
Fiscal Year end
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (US GAAP). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature.
Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its 100% controlled Israeli subsidiary, Stratford Ltd (“Stratford”) as of December 31, 2021. All significant intercompany accounting transactions have been eliminated as a result of consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “General and Administrative” on the Company’s consolidated statements of operations.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes foreign currency translation adjustments related to the Company’s subsidiary in Israel and is excluded from the accompanying consolidated statements of operations.
Property and Equipment
Property and equipment, including leasehold improvements, are recorded at cost net of accumulated depreciation. Maintenance and repairs are expensed as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:
Computer equipment | | 3 years |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (Continued)
Intangible Assets
The Company recognizes assets for customer relationships, developed technology, post-technological feasibility software development costs, patents and finite-lived trade names. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from 3 to 8 years. Amortization for developed technology is recognized in cost of revenue. Amortization for customer relationships and trade names is recognized in sales and marketing expenses.
In the year ended December 31, 2021, the Company recorded assets acquired in the cumulative amount of approximately $3.4 million (cash proceeds, share based consideration and the assumption of certain repayable grants issued by the government of Israel which financed certain development activities related to the intellectual property) purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. Intangible assets acquired included intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property and the future estimated value of certain customer relationships. We initially record acquired intangible assets at their estimated fair values and we review these assets periodically for impairment.
Software Research and Development Expenditures
Software development expenditures consist primarily of costs associated with the on-going modifications to certain software acquired from Royal App including employee compensation and certain stock-based compensation associated with certain employee contracts, as well as other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development incurred pre-technological feasibility are expensed as incurred. Post-technological feasibility expenditures are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.4 million purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. During the year ended December 31, 2021, we capitalized approximately $990,000 in ongoing development expenditures incurred post technological feasibility, and $28,483 in patent related expenditures.
Impairment
We account for indefinite-lived intangible assets using the accounting guidance in ASC 350-30-35. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result, the Company presently has the option to bypass the qualitative assessment and perform the quantitative assessment.
Indefinite-lived intangible assets are addressed under ASC 350-30-35. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result, the Company presently has the option to bypass the qualitative assessment and perform the quantitative assessment.
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:
| ● | Level 1: Observable inputs such as quoted prices in active markets; |
| ● | Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions |
The Company’s financial instruments include cash, accounts payable, related party loans and a demand promissory note. The carrying amounts of cash and accounts payable approximate their fair value, due to the short-term nature of these items.
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
· | Identification of the contract, or contracts, with a customer; |
· | Identification of the performance obligations in the contract; |
· | Determination of the transaction price; |
· | Allocation of the transaction price to the performance obligations in the contract; and |
· | Recognition of revenues when, or as, the Company satisfies a performance obligation |
Subscription Revenues
Subscription revenues primarily consist of monthly fees for providing customers access to our software apps including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is different than the next with prices increasing as the functionality increases.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.
Customized Professional Service Revenues
Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the services are performed.
Stock-Based Compensation
We account for stock options granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Stock-Based Compensation (continued)
For the years ended December 31, 2021 and 2020, stock-based compensation and other equity instrument related expenses and expenditures recognized in the consolidated statements of operations is as follows:
| | Year Ended December 31, | |
| | 2021 | | | 2020 | |
Capitalized as software research and development expenditure | | $ | 90,733 | | | $ | - | |
Sales and marketing | | | 19,040 | | | | - | |
General and administrative expenses | | | 1,125,037 | | | | - | |
Total stock-based compensation expense | | $ | 1,234,810 | | | $ | - | |
Leases
The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than twelvemonths are included in Operating lease right-of-use assets and Operating lease liabilities in the Consolidated Balance Sheets.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for non-lease components separately from the lease component.
Income Taxes
Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Basic and Diluted Net Income (Loss) Per Share
In accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
Potential common stock consists of the incremental common stock issuable upon convertible notes, stock options and warrants and classes of shares with conversion features. The computation of basic loss per share for the years ended December 31, 2021 and December 31, 2020 excludes potentially dilutive securities such as share purchase warrants, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 5 – ACQUISITION OF ASSETS
During March 2021 the Company entered into an agreement, (the “Agreement”,) for the purchase of certain assets of Royal App Ltd., a corporation incorporated in Israel, through a liquidation proceeding approved by the Lod District Court (Israel) within the framework of Insolvency Case 53873-01-21. On April 26, 2021, the Company completed a cash payment to the trustee for the acquisition of the identified assets, and the assets were effectively transferred to the Company’s controlled subsidiary, Stratford Ltd. The acquired assets consist primarily of intellectual property which forms the basis of a re-developed SaaS software offering upon completion of development and launch by the Company. At the time of the acquisition of the aforementioned assets, the Company had determined the technological feasibility of the proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering integrated on key reseller platforms.
Assets acquired included intellectual property in the form of a series of customized enterprise software applications, associated patents and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property. The Company also agreed to assume two customer service agreements using the original “Shelfy” enterprise software application, with limited remaining life spans. Finally the Company acquired certain equipment and fixed assets which had been fully depreciated at the time of acquisition. Liabilities acquired included certain repayable government grants.
In consideration for the assets acquired the Company paid $2,140,288 (net of VAT), assumed approximately $200,000 USD in repayable government grants, which grants are repayable at a rate of 3% of gross sales until retired in full, and agreed to issue 8% of the Company’s issued and outstanding shares on a diluted basis, following the issuance of certain share capital in respect to the sale of common shares under SAFES, the conversion of 1,000 shares of Series A preferred stock to common stock and an estimate of shares expected to be issued for certain warrants and employee stock options during fiscal 2021. The consideration shares were to be issued to the bankruptcy trustee within 120 days from the date of the closing of the acquisition, April 26, 2021. The trustee, who holds a pledge over the assets of Royal App purchased by Stratford Ltd., may foreclose on such assets in the event the consideration shares were not issued as required under the terms of the Agreement. Any foreclosure would result in the transfer of the ownership of Royal App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The 22,647,751 consideration shares were issued to the trustee in August 2021 and were valued at the fair market value on the date of issue or $967,853 (net of VAT), as part of the acquisition consideration.
The Company has recorded the acquired assets on the Company’s balance sheets as Intangible Assets at fair market value of cash paid and shares issued as of the date of acquisition. Customer relationships were recorded at the fair value of remaining contract terms. Intangible assets acquired were allocated as follows:
Enterprise software applications including associated patents, trademarks and rights | | $ | 3,168,228 | |
Customer relationships | | | 235,000 | |
Total intangible assets | | $ | 3,403,228 | |
The Company’s management determined there is no impairment to the acquired assets or improvements at the year ended December 31, 2021, as the development of the modified software suite for SAAS applications is ongoing.
The Company has recorded the acquired assets on the Company’s balance sheets as Intangible Assets at fair market value of cash paid and shares issued as of the date of acquisition. Customer relationships were recorded at the fair value of remaining contract terms. Intangible assets acquired were allocated as follows:
NOTE 6 – INTANGIBLE ASSETS
The following table provides additional information regarding the intangible assets acquired:
Purchased assets – Royal App (Note 5) | | $ | 3,403,228 | |
Capitalized patent application costs | | | 28,483 | |
Capitalized software development expenditures | | | 990,641 | |
Total intangible assets | | $ | 4,422,352 | |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 6 – INTANGIBLE ASSETS (continued)
The Company has not yet completed the modifications to its upgraded software application which is expected to be launched commercially in the second quarter of fiscal 2022.
NOTE 7 – PRIVATE PLACEMENT
Simple Agreements for Future Equity (“SAFES”)
Investor deposits consist of $3,250,000 of gross proceeds received in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices during the period ended June 30, 2021. The terms of the SAFES require that they automatically convert into restricted, unregistered shares of common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock at such price per share equal to the fully diluted capital post conversion of the preferred stock divided by $2,000,000, or $0.02567 per share. On August 20, 2021, 126,614,436 unregistered restricted shares of common stock in exchange for 3.25M in proceeds from SAFES.
Private Investment in Public Equity (“PIPE”)
During the year ended December 31, 2021, the Company received gross proceeds of $1,881,000 from accredited investors in the form of PIPES and completed the sale of 25,080,000 units at a price of $0.075 per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each warrant is exercisable into one share of common stock at a price of $0.0975 expiring in two years.
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
Common Stock and Preferred Stock
Up to August 9, 2021, Company had authorized 50,000,000 shares of Common stock, no par value and 10,000,000 shares of Preferred stock, no par value, of which 1,385 shares have been designated Series A convertible preferred stock with a liquidation preference of $10,000 per share. Holders of convertible preferred stock, when voting with the holders of our common stock, are entitled to an approximate 0.856 vote for each share of common stock into which the Series A convertible preferred stock registered in the shareholder’s name can be converted. Each share of Series A convertible preferred Stock is convertible into approximately 71,683.25 shares of common stock. In addition, the holders of the convertible preferred stock were entitled to elect a majority of the members of our Board of Directors. On August 9, 2021, the Company filed articles of conversion moving its registration to the State of Delaware and amending the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000, $0.0001par value, and eliminating the Preferred stock.
During the year ended December 31, 2021, the Company issued the following shares of common stock:
- | 71,683,250 shares of unregistered restricted common stock upon conversion of 1,000 shares of the Series A convertible Preferred stock to its controlling shareholder, Everest Credit L.P., a company of which our President and Director is a beneficial owner; |
| |
- | 5,661,938 shares of unregistered restricted common stock to Everest Corporate Finance Ltd., a company of which our President and Director is a beneficial owner, as commission fees in respect to the acquisition of the assets of Royal App Ltd; |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
- | 22,647,751 shares of unregistered restricted common stock to the Trustee in Liquidation for Royal App as part of the agreed consideration under the acquisition agreement; |
| |
- | 126,614,436 unregistered restricted shares of common stock in exchange for 3.25M in proceeds from SAFES from various accredited investors. |
| |
- | 25,080,000 units at $0.075 each for gross proceeds of $1,881,000 in the form of PIPES. Each unit consists of one common share and one-half of one share purchase warrant. Each warrant will entitle the holder to purchase one common share for $0.0975 expiring in two years. The Company paid agent commissions on $1.376 M in proceeds at 4.25% for a total of $58,480 in financing costs. The Company granted 7,791,658 Stock Purchase Warrants to one of its financing agents, exercisable for a period of two years from the date of grant at $0.02567 per share. The Company recorded $854,632 in financing costs. |
On December 31, 2021 and December 31, 2020, the Company had 257,920,700 and 6,233,326 shares of common stock issued and outstanding, respectively, and 0 and 1,000 shares of Series A Preferred stock issued and outstanding, respectively.
Stock Purchase Warrants
The following warrants were outstanding as at December 31, 2021:
Number of Warrants | | Exercise Price ($) | | Expiry Date |
1,333,333 | | 0.0975 | | September 09, 2023 |
500,000 | | 0.0975 | | September 27, 2023 |
7,791,658 | | 0.02567 | | October 1, 2023 |
333,333 | | 0.0975 | | October 18, 2023 |
5,666,667 | | 0.0975 | | October 19, 2023 |
1,000,000 | | 0.0975 | | October 21, 2023 |
240,000 | | 0.0975 | | October 24, 2023 |
666,667 | | 0.0975 | | October 26, 2023 |
666,667 | | 0.0975 | | October 28, 2023 |
600,000 | | 0.0975 | | October 29, 2023 |
800,000 | | 0.0975 | | November 01, 2023 |
533,333 | | 0.0975 | | November 02, 2023 |
200,000 | | 0.0975 | | November 19, 2023 |
20,331,658 | | | | |
Warrant transactions are summarized as follows:
| | Number of Warrants | | | Weighted Average Exercise Price ($) | |
Balance, December 31, 2020 | | | - | | | $ | - | |
Warrants issued | | | 20,331,658 | | | | 0.07 | |
Warrants expired | | | - | | | | - | |
Balance, December 31, 2021 | | | 20,331,658 | | | $ | 0.07 | |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)
Stock Purchase Warrants (cont’d)
The following weighted average assumptions were used for the Black-Scholes pricing model valuation of warrants issued during the year ended December 31, 2021 to allocate the proceeds between common stock and additional paid-in capital:
| 2021 |
| |
Risk-free interest rate | 0.23% ~ 0.52% |
Expected life of warrants | 2 years |
Expected annualized volatility | 423.32% ~ 428.65% |
Dividend | Nil |
Forfeiture rate | 0% |
Stock Options
The Company granted the following Stock options under its 2021 Employee Stock Incentive Plan:
- | 9,000,000 fully vested incentive stock options to directors, officers and consultants of the Company for exercise at $0.0257 for a term of 4 years from grant. |
- | 7,077,422 qualified employee stock options to certain officers, directors and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.123 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of October 26, 2021. |
- | 11,465,424 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.02567 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of May 2, 2021. |
Additional information with respect to the stock option activity is as follows:
| | Number of Shares | | | Weighted Average Exercise Price | | | Weighted Average Remaining Term in Years | | | Aggregate Intrinsic Value | |
Outstanding at December 31, 2020 | | | - | | | $ | - | | | | - | | | $ | - | |
Granted in 2021 | | | 27,542,845 | | | $ | 0.0507 | | | | | | | | | |
Exercised in 2021 | | | - | | | $ | - | | | | | | | | | |
Cancelled in 2021 | | | | | | $ | - | | | | | | | | | |
Outstanding at December 31, 2021 | | | 27,542,845 | | | $ | 0.05068 | | | | 3.60 | | | $ | - | |
| | | | | | | | | | | | | | | | |
Options exercisable at December 31, 2021 | | | 9,000,000 | | | $ | 0.02567 | | | | 3.75 | | | $ | - | |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
Stock Options (cont’d)
The following table summarizes information about stock options outstanding and exercisable at December 31, 2021:
Range of Exercise Prices | | Number of Shares Outstanding | | | Weighted Average Remaining in Contractual Life in Years | | | Outstanding Options Weighted Average Exercise Price | | | Number of Options Exercisable | | | Exercisable Options Weighted Average Exercise Price | |
$0.02567 | | | 9,000,000 | | | | 3.75 | | | $ | 0.02567 | | | | 9,000,000 | | | $ | 0.02567 | |
$0.02567 | | | 11,465,423 | | | | 3.34 | | | $ | 0.02567 | | | | - | | | $ | - | |
$0.12300 | | | 7,077,422 | | | | 3.82 | | | $ | 0.12300 | | | | - | | | $ | - | |
$0.02567 ~ $0.12300 | | | 27,542,845 | | | | 3.60 | | | $ | 1.87 | | | | 9,000,000 | | | $ | 0.02567 | |
Unamortized compensation expense associated with unvested options is $1,821,701 as of December 31, 2021. The weighted average period over which these costs are expected to be recognized is approximately 3.6 years.
NOTE 9 – COMMITMENTS
Leases
We leased a car in Israel with the lease term in 36 months to July 2024.
We used a discount rate of 6.75% in determining our operating lease liabilities, which represented our incremental borrowing rate. Short-term leases with initial terms of twelve months or less are not capitalized.
We determine if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain lease agreements contain extension options; however, we have not included such options as part of right-of-use assets and lease liabilities because we originally did not expect to extend the leases. We measure and record a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, we measure the right-of-use assets and lease liabilities using a discount rate equal to our estimated incremental borrowing rate for loans with similar collateral and duration.
Operating lease expense is comprised of the following:
| | Year Ended December 31, | |
| | 2021 | | | 2020 | |
Operating lease cost | | $ | 6,993 | | | $ | - | |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 9 – COMMITMENTS (Continued)
Leases (Cont’d)
Maturities of lease liabilities are as follows:
| | Operating Leases | |
2022 | | $ | 14,804 | |
2023 | | | 14,804 | |
2024 | | | 8,637 | |
Total lease payments | | | 38,245 | |
Less imputed interest | | | (3,237 | ) |
Total lease liabilities | | | 35,008 | |
Less current portion of lease liabilities | | | (12,835 | ) |
Long-term lease liabilities | | $ | 22,173 | |
NOTE 10 – RELATED PARTIES TRANSACTIONS
Key management compensation
Key management personnel are persons responsible for planning, directing and controlling the activities of the entity, and include all directors and officers.
| | Years Ended December 31, | |
| | 2021 | | | 2020 | |
Management fees | | $ | 294,101 | | | $ | 48,000 | |
At December 31, 2021, accounts payable and accrued liabilities included $22,139 ($0 – December 31, 2020) of management fees with respect to key management compensation.
NOTE 11 – INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the tax effects of differences between the financial statement and tax basis of assets and liabilities. A valuation allowance is established to reduce the deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.
As of December 31, 2021, the Company has net operating loss carryforwards of approximately $132,300,000 to reduce future taxable income. Of the $135,600,000, approximately $128,770,000 can be used through 2037, and $3,530,000 may be carried forward indefinitely. A valuation allowance for the entire amount of deferred tax assets has been established as of December 31, 2021 and 2020.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 11 – INCOME TAXES (Continued)
The provision for (benefit from) income taxes consist of the following:
| | Year Ended December 31, 2021 | | | Year Ended December 31, 2020 | |
Current | | | | | | |
Federal | | $ | - | | | $ | - | |
State | | | - | | | | - | |
| | | - | | | | - | |
Deferred | | | | | | | | |
Federal | | | - | | | | - | |
State | | | - - | | | | - - | |
| | | | | | | | |
Total income tax provision (benefit) | | $ | - | | | $ | - | |
A reconciliation of the provision for income taxes at the federal statutory rates of 21% to the Company’s provision for income tax is as follows:
| | Year Ended December 31, 2021 | | | Year Ended December 31, 2020 | |
U.S. Federal (tax benefit) provision at statutory rate | | $ | (27,784,200 | ) | | $ | (27,082,400 | ) |
Changes in valuation allowance | | | 27,784,200 | | | | 27,082,400 | |
Total | | $ | - | | | $ | - | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company’s deferred tax assets and liabilities for the periods presented:
| | December 31, 2021 | | | December 31, 2020 | |
Deferred Tax Assets | | | | | | |
Net operating losses | | | 701,800 | | | | 11,200 | |
Total deferred tax assets | | | 701,800 | | | | 11,200 | |
Valuation allowance | | | (701,800 | ) | | | (11,200 | ) |
Net deferred tax assets | | | - | | | | - | |
| | | | | | | | |
Deferred Tax Liabilities | | | | | | | | |
Total deferred tax liabilities | | | - | | | | - | |
Net deferred tax | | $ | - | | | $ | - | |
The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. Due to the history of losses the Company has generated in the past, the Company believes that it is not more likely than not that all of the deferred tax assets in the U.S. can be realized as of December 31, 2021 and 2020, accordingly, the Company has recorded a full valuation allowance on its U.S. deferred tax assets.
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 11 – INCOME TAXES (Continued)
The Company files income tax returns in the United States on federal basis and various states. The Company is not currently under any international or any United States federal, state and local income tax examinations for any taxable years. All of the Company’s net operating losses are subject to tax authority adjustment upon examination.
NOTE 12 – SUBSEQUENT EVENTS
Subsequent to December 31, 2021, the Company has filed a Registration Statement on Form S-1 with the Securities and Exchange Commission to offer up to 80,000,000 Units consisting of one share of common stock and a ¼ warrant at $0.12 per Unit, with the associated warrants having an exercise price of $0.15 per share for a period of one year. Further the Company is registering a total of X shares for certain selling stockholders.
Subsequent to December 31, 2021, the Company has commenced an offering of Convertible Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder shall receive a ½ warrant for each $1 in Note proceeds, convertible at $0.12 per share for a term of one year from issue date. The Company has received a total of $200,000 in proceeds with respect to the Notes.
The Company has evaluated events for the period from December 31, 2021, through the date of the issuance of these financial statements and determined that there are no additional events requiring disclosure.
Shares of Common Stock
200,031,733 SHARES OF COMMON STOCK BY SELLING SHAREHOLDERS AND
21,998,323 SHARES OF COMMON STOCK UNDERLYING WARRANT EXERCISES BY OUR SELLING SHAREHOLDERS AND
80,000,000 SHARES OF COMMON STOCK TO BE SOLD AS PART OF THIS OFFERING AND
20,000,000 WARRANTS TO BE SOLD AS PART OF THIS OFFERING AND 20,000,000 SHARES OF COMMON STOCK UNDERLYING THE 20,000,000 WARRANTS
PROSPECTUS
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Expenses incurred or expected relating to this prospectus and distribution, all of which we will pay, are as follows:
SEC Registration Fee | | $ | 3,544 | |
Printing and Engraving Expenses | | $ | 20,000 | |
Legal Fees and Expenses | | $ | 60,000 | |
Accounting Fees and Expenses | | $ | 35,000 | |
Transfer Agent and Registrar Fees and Expenses | | $ | 15,000 | |
| | | | |
TOTAL | | $ | 133,544 | |
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the “Delaware Law”) authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, (including reimbursement for expenses incurred) arising under the Securities Act of 1933. The Certificate of Incorporation provides for indemnification of officers, directors and other employees of the Corporation to the fullest extent permitted by Delaware Law. Our Certificate of Incorporation provides that directors shall not be personally liable to the Corporation or its stockholders for monetary damages except as provided by law.
Our Bylaws provide that the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with which action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful.
Except as provided above, our Certificate of Incorporation provides that a director shall be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware Law or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware Law. Neither any amendment to or repeal of our Certificate of Incorporation, nor the adoption of any provision hereof inconsistent with our Certificate of Incorporation, shall adversely affect any right or protection of any director of the Corporation existing at the time of, or increase the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to or at the time of such amendment.
Neither our Bylaws, nor our Certificate of Incorporation include any specific indemnification provisions for our officer or directors against liability under the Securities Act of 1933, as amended (the “Act”). Additionally, insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding the issuance and sales of securities during the previous three years. No such sales involved the use of an underwriter; no advertising or public solicitation was involved; the securities bear a restrictive legend; and no commissions were paid in connection with the sale of any securities.
In March and June 2022, the Company issued a cumulative 1,958,332 warrants issued in conjunction with our offering of short-term notes are exercisable for a period of one year from the date of such warrant, at an exercise price of $0.12 per share. The exercise price of the warrants shall be on a cash, and not a cashless, basis, and the warrants may be exercised in full or in part. The exercise price of the warrants is subject to adjustment pursuant to any stock-split, reclassification, reorganization, or consolidation of the company. No fractional shares shall be issued as part of a conversion of the warrants. Subsequent to June 30, 2022, 291,667 of these warrants were canceled.
Between June 30, 2022 and October 18, 2022, the Company received a total of $869,000 in cash proceeds from certain Note and Securities Purchase Agreements (the “Offering Notes”), and rolled over $570,000 of previously incurred debt under certain notes entered into during the first quarter, including accrued interest (the “New Notes”), with each of the Offering Notes and New Notes having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 10,214,547 shares of common stock to the Noteholders in conjunction with the terms of the agreements. The Company paid commissions of approximately $63,000 in respect to the aforementioned transactions, of which $48,818 was paid to a company controlled by our acting CEO.
All of the above listed issuances were issued in reliance upon an exemption provided by Regulation S and/or Section 4(2) promulgated under the Securities Act.
16. Exhibits.
The following exhibits are included with this registration statement, or if previously filed, are incorporated herein by reference:
*Previously filed as part of S-1 Registration Statement on February 11, 2022.
** Previously filed as part of Amendment No. 1 to S-1 Registration Statement on September 7, 2022
^ Filed herewith
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
A. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
a. to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
b. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of Regulation S-K) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
c. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from the registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B (Sec.230.430B of this chapter):
(a) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (Sec.230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(b) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (Sec.230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (Sec.230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C (Sec.230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (Sec.230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
(i) The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (Sec.230.424 of this chapter);
(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The Registrant hereby additionally undertakes that:
(a) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
A. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
a. to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
b. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of Regulation S-K) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
c. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from the registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B (Sec.230.430B of this chapter):
(a) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (Sec.230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(b) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (Sec.230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (Sec.230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C (Sec.230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (Sec.230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
(i) The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (Sec.230.424 of this chapter);
(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The Registrant hereby additionally undertakes that:
(a) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.